INTERFUEL SUBSTITUTION AND NATURAL GAS TRADE IN NORTH AMERICA (ENERGY MODELING, DISEQUILIBRIUM, MARKET SHARE, DEMAND ESTIMATION)

Institutional changes in North American natural gas markets have created much uncertainty about the prospects for gas trade between Canada, Mexico, and the U.S. This dissertation describes the formulation of the Gas Trade Model (GTM) and the submodel of U.S. gas demands. Together, they provide a modeling framework within which international gas trade after the deregulation of the U.S. natural gas market can be examined.;As a complement to GTM, a submodel of U.S. natural gas demand is developed. It consists of four demand sectors: residential, commercial, industrial, and electric utility. The submodel allows for dynamic adjustment in all four sectors. In addition, it recognizes that interfuel substition possibilities in the industrial and electric utility sectors are increasing along with the presence of equipment that can burn either gas or fuel oil.;Because of their complexity and importance in total U.S. gas consumption, gas demands for purchased heat and power in U.S. manufacturing are given special attention. Specifically, econometric demand equations for electricity, coal, and total hydrocarbons are estimated, allowing for capital-embodied dynamic adjustment, interfuel substitution, and substitution between energy and non-energy inputs. Gas and fuel oil demands are calculated from hydrocarbon consumption using estimated BTU share equations. In estimating these share equations, we account for the fact that, during much of the sample period, gas supplies were rationed to manufacturing industries. A limited dependent variable method is employed, which is less restrictive than other methods used for disequilibrium estimation.;We report on projections for the year 2000 and examine altternative Canadian export policies. We also report on sensitivity with respect to key parameters and assumptions that affect gas demands.;GTM is a market equilibrium model that allows for interdependence between gas prices and the quantities traded at a single point in time. Regionally disaggregated trade flows are projected between Canada, Mexico, and the U.S. The model is intended to provide a background for realistic bargaining over international prices and risk sharing in an era when the U.S. market is deregulated, but Canada and Mexico maintain export controls.