On October 28, The Millennium Institute for Research on Market Imperfections and Public Policy (MIPP), organized the talk “A Study of the Gas Market” – a report on the research conducted by the National Economic Prosecutor’s Office (FNE) on the gas market in Chile for the period 2010-2020. The event was attended by Sebastián Castro and Felipe Castro, head and deputy head of the Market Studies Division at the FNE, respectively, as well as Ronald Fischer, an academic at the Department of Industrial Engineering, University of Chile and researcher at MIPP.
The study addressed the situation of the liquefied petroleum gas (LPG) and natural gas (NG) segments, an area where the work reveals hoarding by large companies. In the liquefied gas section, specifically, the horizontal and vertical structure of this market was analyzed. Regarding the first, the research examined the dynamics that exist from the wholesale company to the final consumer.
With respect to demand, the deputy head of the FNE’s Market Research Division, Felipe Castro, stated that “it is seasonal and it makes it possible for agents to predict it according to the time period.” This influences the fluctuation of prices, which is not only correlated with the value of oil. In fact, the FNE detected that prices are quickly transmitted “downstream” to retailers and final consumers. That is to say, the rise in prices is faster than the fall in them.
Castro also emphasized that, if these proposals are accepted, the retail price of a liquefied gas cylinder should decrease by around 15%, and the price of natural gas paid by Metrogas customers should drop between 13% and 20%.
This is the sixth market study carried out by the FNE, following studies on Life Annuities, Notaries, School Texts, Medicines and Public Purchases. All studies have been incorporated at different levels, in improvements made to the regulation of the activities that were the object of the research.
On this topic, Ronald Fischer, indicated that the report is revealing with respect to the lack of competition in the sector. “When one reviews the study, it suggests that there are explicit conditions in the market regarding coordination between the actors,” he said.
This report will be submitted to public consultation in various occasions, until November 4. Following this, the FNE will publish its final conclusions, which will be sent to the Executive Branch for evaluation of their implementation.
You can review the talk “A Study of the Gas Market” in the following video:
Extracts of this note were originally published by the FNE and the University of Chile.
MIPP Chile 2024