Western Australia's Domestic Gas Reservation Policy: Modelling the Economic Impact with a Computable General Equilibrium Approach

24 Pages Posted: 22 Mar 2019

See all articles by Kelly Neill

Kelly Neill

Rice University - Department of Economics

Peter R. Hartley

Rice University - Department of Economics; National Bureau of Economic Research (NBER)

Rod Tyers

Australian National University (ANU) - School of Economics; The University of Western Australia - Department of Economics

Philip D. Adams

Victoria University - Centre of Policy Studies

Date Written: March 2019

Abstract

The gas reservation policy of Western Australia (WA) diverts 15 per cent of liquefied natural gas exports to the local market, suppressing domestic gas prices. To examine the policy's effects, this paper employs a detailed model of the WA gas market that incorporates project‐by‐project supply, the very large fixed costs typical of gas supply projects, foreign ownership on both sides of the market and oligopolistic pricing power. This model is interlinked with the established Centre of Policy Studies’ Victoria University Regional Model of the Australian state and national economies and shows that the policy, as it has been applied to the Gorgon and Wheatstone projects, imposes an overall net loss to the nation of around $600 million each year. The net loss to Australian households is estimated to be $300 million. Moreover, no net long‐run advantage is seen to be conferred on WA's workers or consuming households.

Suggested Citation

Neill, Kelly and Hartley, Peter R. and Tyers, Rod and Adams, Philip D., Western Australia's Domestic Gas Reservation Policy: Modelling the Economic Impact with a Computable General Equilibrium Approach (March 2019). Economic Record, Vol. 95, Issue 308, pp. 90-113, 2019, Available at SSRN: https://ssrn.com/abstract=3355923 or http://dx.doi.org/10.1111/1475-4932.12459

Kelly Neill (Contact Author)

Rice University - Department of Economics ( email )

6100 South Main Street
Houston, TX 77005
United States

Peter R. Hartley

Rice University - Department of Economics ( email )

6100 South Main Street
Houston, TX 77005
United States
713-527-8101x2534 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Rod Tyers

Australian National University (ANU) - School of Economics ( email )

Arndt Building
Australian National University
Canberra, Australian Capital Territory 0200
Australia
61-6-249-5124 (Fax)

The University of Western Australia - Department of Economics ( email )

35 Stirling Highway
Crawley, Western Australia 6009
Australia
61 8 6488 5632 (Phone)

HOME PAGE: http://www.business.uwa.edu.au/school/staff-profiles?type=profile&dn=cn%3DRodney%20Tyers%2Cou%3DEcon

Philip D. Adams

Victoria University - Centre of Policy Studies ( email )

Melbourne, Victoria
Australia

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
1
Abstract Views
108
PlumX Metrics