The natural gas industry in Europe and the US consists of a number of capital-intensive and technically demanding activities, such as production, pipeline transportation, and end-user consumption. There are 2 basic approaches used to set the price of natural gas to consumers: 1. to let interfuel competition determine the price at the burner tip, and 2. to regulate wellhead prices. The US experience is more complicated than that of West Germany. Gas pipelines in the US were unregulated until the Natural Gas Act of 1938, which regulated type of service, entry, and rates charged by interstate pipelines. The West German industry has grown over the past 25 years based on indigenous supplies and imports. It is functionally integrated downstream of production, with long-term contract and other organizational arrangements bridging to production. It has achieved this performance record without regulation. Controls on natural gas in the US were a misguided enterprise from the beginning and are the main reason why the German industry has performed better. Open access has provided temporary relief in the US for natural gas consumers, but it has created problems for the pipelines by exaggerating take-or-pay liabilities and supply insecurity for gas consumers.
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