Journal of Chemical and Pharmaceutical Research (ISSN : 0975-7384)

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Original Articles: 2014 Vol: 6 Issue: 4

The existing pipeline asset and spillover effect:The economic perspective of pipeline sharing

Abstract

A spok es model is established to analyze how the existing pipeline asset and its spillover effect will influence the corporate profit . It shows that if the existing pipeline asset s among oil and gas companies are symmetrical, their product prices, demands and profits are also symmetrical; if there is a large existing pipeline asset gap among oil and gas companies, the optimal strategy for the company with pipeline advantage is to decrease its pipeline asset s ’ spillover effect, i.e. preponderant company will not share its pipeline s , and the disadvantaged companies with relatively few pipeline s have to construct pipeline s by themselves , or degenerate int o suppliers of the preponderant company. It implies the reason why oil and gas companies are unwilling t o share their pipelines is that sharing pipeline will decrease the monopoly power of the preponderant company. Therefore, in order to encourage oil and gas companies to share pipelines , the government needs to formulate a reasonable charge scheme of pipeline use fee . Besides, if the government plans to realize the reorganization and independence of pipeline s , the government needs to consider the opportuni ty fair, and compensate the loss of dominant company caused by pipeline independen ce . In addition, facilitating the cooperation of upstream and downstream industries among different companies is also a feasible way to alleviate the problem of repeated pipe line construction