Estimation Of Losses From The Use Of Volume Units To Account For Natural Gas For Households In Ukraine

The Razumkov Centre has published the Proceedings of the 2019 7th International Conference on Modeling, Development and Strategic Management of Economic System (MDSMES 2019).

The natural gas market is characterised by a significant level of deadweight losses, which are due to the inability to apply perfect competition mechanisms during pricing. However, there are other loses to economic agents that are due to the technology used in the natural gas market. I have highlighted one of such types of losses that is characteristic of natural gas markets that use volume units to account for natural gas transmitted or consumed. Consideration of natural gas as an energy commodity, which is measured in units of energy, and the fact that the volume units of natural gas obtained from different sources have different energy values due to different physical and chemical properties, make the natural gas market, which uses the volume units, unfair. I proposed to calculate the losses of economic agents, which occurred due to the use of volume units to account for natural gas, as losses resulting from the deviation of the actual and average cost of a unit of natural gas energy in Ukraine.

Read more