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Alternatives to the Strait of Hormuz

Dagobert L. Brito and Eytan Sheshinski

Year: 1998
Volume: Volume19
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol19-No2-9
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In this paper we study the cost of adding additional capacity to transport oil from Saudi Arabia and Kuwait to the Red Sea. If this capacity is obtained by adding power to the existing pipelines, the cost would increase by approximately 14 cents per barrel, but would require large capital expenditures. If this capacity is obtained by using Drag Reduction Agents, the cost would increase by 25 to 65 cents per barrel with minor capital expenditures. Since Arabian oil is inframarginal, these increased costs should have no impact on the supply of oil.

Pricing Natural Gas in Mexico: An Application of the Little-Mirrlees Rule

Dagobert L. Brito and Juan Rosellon

Year: 2002
Volume: Volume23
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol23-No3-4
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The Mexican energy regulatory commission--Comision Reguladora de Energia (CRE)--has implemented a netback rule for linking the Mexican market for natural gas with the North American market. This paper describes the economic analysis that supported this policy. We show that the netback rule is the efficient way to price natural gas and it is in fact an application of the Little-Mirrlees Rule.

Expectations and the Evolving World Gas Market

Dagobert L. Brito and Peter R. Hartley

Year: 2007
Volume: Volume 28
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No1-1
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A number of authors have noted that recent changes in the liquefied natural gas (LNG) industry are likely to favor shorter term multilateral trades of LNG relative to long term bilateral and project-specific contracts. We present a model in which expectations of such a change in market structure alter investment behavior in a way that reinforces the original tendency. The result is that the structure of the natural gas market could change quite quickly, as happened previously in the world oil market.

Economics of Pricing the Cost of Carbon Dioxide Restrictions in the Production of Electricity

Dagobert L. Brito and Robert F. Curl

Year: 2011
Volume: Volume 32
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol32-No4-2
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We calculate the cost of a carbon dioxide constraint in the production of electricity by modeling the replacement of coal generators with natural gas generators. We find: First, replacing coal generators with natural gas generators is the most economical way to reduce carbon dioxide emissions by 20 percent. Second, replacing existing coal generation capacity with modern coal generation plants can only reduce total carbon dioxide by 5 percent. Third, the distribution of the efficiency of coal generators in the United States restricts the range over which carbon dioxide prices effectively manage the displacement of coal by gas. Fourth, the narrow range for the price of carbon dioxide creates the possibility that a market in carbon dioxide permits will result in high volatility in the market for electricity. Fifth, the carbon prices implied by the transition from coal to gas will have very little impact on transportation fuels.

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