Studying the Dynamic Effects of Natural Gas Prices on Supply Security, a Systems Approach

Abstract: ensuring a reliable energy supply and demand system with appropriate growth is the main concern of any country for its comprehensive development. Domestic energy prices play an important role in energy security by controlling demand growth, and by incentivizing investments in energy resources development. In this paper, a simulation model is developed to explore how determining different prices of natural gas for various domestic demand sectors, i.e. differential pricing, affects supply security. The domestic natural gas consumption is categorized in four groups of the residential, power plants, industrial and transportation, and the dynamics between prices, supply and demand are modeled using a system dynamics model. The model is applied to a case study and various pricing policies and their influence on natural gas income and production are explored, and the minimum price growth for each sector that provides supply security is proposed.