An ex-post welfare analysis of natural gas regulation in the industrial sector

The current structure of the US natural gas industry is a result of the evolution of regulatory policy over the past three decades which began with the deregulation of natural gas prices at the wellhead (NGPA of 1978) and culminated with the deregulation of interstate transportation of natural gas (FERC Order 636). Focusing on the industrial sector, this paper estimates the welfare and price effects associated with the changes in regulatory policy. Overtime, actual prices converge towards estimated equilibrium prices. Consequently, deadweight losses diminished. An estimated $15.47 billion (2003 dollars) of welfare loss had been incurred from 1977 to 2000.