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

Date

2019

Authors

Neill, Kelly
Hartley, Peter
Tyers, Rodney
Adams, Phillip

Journal Title

Journal ISSN

Volume Title

Publisher

Blackwell Publishing Ltd

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.

Description

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Citation

Source

Economic Record

Type

Journal article

Book Title

Entity type

Access Statement

License Rights

DOI

10.1111/1475-4932.12459

Restricted until

2099-12-31