Producer and Consumer Interests, the State-Owned Pipeline, and Public Authority Pricing of Natural Gas*

This paper considers producer and consumer interests when state ownership of a pipeline provides a public authority with monopoly and monopsony power. In contrast with the producer/consumer conflict in the regulatory setting where self-interested authorities choose the price at which producers and consumers directly transact with one another, in the pipeline case producers and consumers have a commonality of interest which is sustained even if the authorities take the view that it is politically inexpedient to take advantage of monopoly power with respect to consumers.