Socially Optimal Market Prices / for Associated Petroleum Gas and the Problem of Their Acceptability

Abstract

The socially optimal price (Russ. – GOC) is the price that is most relevant to the public interest. However, in some markets, situations arise when the GOC turns out to be negative, that is, the seller has to pay the buyer for the product being sold. In such situations, there may be a conflict of interests between the seller (trader) and the company. One of these markets is the oil associated gas (Russ. – APG) market in Russia. The oil associated gas market is unique and has no analogues in the world. The market structure is monopoly-monopsony. SIBUR comes from the buyer of petroleum gas, one of the oil-producing companies from the seller’s side. In the course of its historical development, conflicts often arose in the market, which were based on the pricing of petroleum gas. Market participants could not agree on a fair price for gas. This circumstance prompted the regulator to reform the NPG market using a scientific approach. In 2009, the NPG market was liberalized, but the state does not monitor prices in this market. Calculations made in 2016 showed that in some cases, an EOC for oil associated gas is negative. When applying negative OOCs, a conflict of interest is inevitable, which can lead to serious market disruptions and jeopardize the work of the petrochemical industry in Russia. The article attempts to analyze the acceptability of the use of negative GOCs and to develop measures aimed at increasing the acceptability of the sellers of negative GCbs of the products they sell.