Factors And Variables Of A Competitive Market

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Factors and Variables Say something about univariate and multivariate models. In a competitive market (e.g. the U.S. energy market), the price of commodity will vary until it reaches the economic equilibrium point which is a point where the quantity demanded will be equal to the quantity supplied at the current price. According to this theory, excess supply results the price decline and excess demand yields increment of the price. The equilibrium state remains same until the market situation is not changed. If some condition changed in the current market, for example an unforeseen cold winter occurs, the level of demand will change. This change defined a new point as an economic equilibrium state and prices move to the new point. The new equilibrium price is the price in which supply and demand are balanced in the same quantity transaction. Some factors may also affect the supply and demand of the natural gas such as macroeconomic parameters, natural gas production and consumption, storage and inventories, weather conditions, pipeline capacity, and fuel substitutions. Political issues, military interface, and economic instability as an important factor in the energy market, particularly in the oil market are not considered in the previous researches (Chiroma, et al. 2013) because evaluation and quantizing of these variables is not an easy task. Introducing too much parameters may lead us to more precisely, but on the other hand, we would reach a complicated model that is more difficult in calculation and understand. An optimum model should be simple enough to calculate with desirable accuracy. Natural Gas Production and Consumption Production and consumption of natural gas are the variables that are directly tied to the supply a... ... middle of paper ... ... buildings require to heat/cool to maintain a 70 degree temperature inside (ASHRAE 1993). Therefore, we assume 65 °F as the base temperature in our calculations. The following linear functions are cooling and heating degree days in term of temperature of current day. CDD={█(0 T≥65℉@65-T T65℉)┤ Eq. 17 Macroeconomics Parameters Macroeconomic factors indicate the condition of the national economy. For example, economic growth may demonstrate the industrial section is growing up or people can pay more for their living cost and welfares. Industrial section needs energy to work and produce goods, and demands of natural gas as a significant source of energy will increase. In general, overall condition of macroeconomics shows the natural gas demand. GDP growth rate or simply economic growth rate is my suggestion for this research.

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