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But capacity prices were not discounted last year, which may be why the pipeline was not full, even as demand surged.
"Once you breach storage capacity, prices have to spike below cash costs because you have to shut in production almost immediately," Currie said.
Without a turnaround in the price of oil, which has roared to a one-year high of $38 a barrel, or a magical increase in refining capacity, prices are likely to rise higher still.
However, equilibrium capacity prices are non-competitive.
A scoring rule based on capacity prices only ensures an efficient production schedule.
Subsidized entry suppresses capacity prices and induces an inefficient allocation of capacity.
Similar(50)
"We have an industry that is too fragmented, with too many competitors, too many different ideas of capacity, pricing and strategic activity".
"We have an industry that is too fragmented, with too many competitors, and with different ideas of capacity, pricing and strategic activity".
Executives from five oil companies were subpoenaed to appear at a state hearing next month and provide information about refinery capacity, pricing and profits earned after Hurricanes Katrina and Rita.
The two-part electricity pricing includes capacity price and electricity price.
All bidders are paid capacity price whether reserve capacity is dispatched or not.
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CEO of Professional Science Editing for Scientists @ prosciediting.com