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Faculty of Economics

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Ritz, R.

Price Discrimination and Limits to Arbitrage in Global LNG Markets

CWPE1340

Abstract: Gas prices around the world vary widely despite being connected by international trade of LNG Some industry observers argue hat major exporters g , Qatar) have acted irrationally by failing to engage in price arbitrage. This is also difficult to reconcile with a perfectly competitive model in which price differences exist solely because of transport costs we show that a model with market power can rationalize observed price differentials and trade flows. We highlight how different features of the LNG market limit the ability and/or incentive of other players to arbitrage, and discuss the potential impact of US LNG exports.

Keywords: International trade, limits to arbitrage, LNG pricing, market power,natural gas, price discrimination

JEL Codes: D40 F12 L95

Author links: Robert Ritz  

PDF: http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe1340.pdf

EPRG Paper Link: 1317

Open Access Link: https://doi.org/10.17863/CAM.5731


Published Version of Paper: Price discrimination and limits to arbitrage : an analysis of global LNG markets, Ritz, R., Energy Economics (2014)

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