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The Political Economy of Pipelines

A Century of Comparative Institutional Development

With global demand for energy poised to increase by more than half in the next three decades, the supply of safe, reliable, and reasonably priced gas and oil will continue to be of fundamental importance to modern economies. Central to this supply are the pipelines that transport this energy. And while the fundamental economics of the major pipeline networks are the same, the differences in their ownership, commercial development, and operation can provide insight into the workings of market institutions in various nations.
Drawing on a century of the world’s experience with gas and oil pipelines, this book illustrates the importance of economics in explaining the evolution of pipeline politics in various countries. It demonstrates that institutional differences influence ownership and regulation, while rents and consumer pricing depend on the size and diversity of existing markets, the depth of regulatory institutions, and the historical structure of the pipeline businesses themselves. The history of pipelines is also rife with social conflict, and Makholm explains how and when institutions in a variety of countries have controlled pipeline behavior—either through economic regulation or government ownership—in the public interest.

288 pages | 3 halftones, 5 line drawings | 6 x 9 | © 2012

Economics and Business: Economics--History, Economics--International and Comparative


“More than a story of pipeline markets and regulation, this book also offers a rich study of how asset specificity, non-deployable capital, and high up-front capital costs affect market development, regulation, pricing, and entry. Makholm takes what would otherwise be a pretty unexceptional industry—pipeline transport—and makes it of interest to a broader audience, especially those concerned with the new institutional economics.”

Gary D. Libecap, University of California, Santa Barbara

How did different regulatory frameworks arise for gas pipelines that have largely similar infrastructures? And why are US gas pipelines the only successful example of a competitive infrastructure market based on Coasian bargaining? Since neoclassical theory is not able to provide adequate answers to these questions or optimal regulatory solutions, Jeff D. Makholm employs the New Institutional Economics, utilizing the work of Oliver E. Williamson to offer a convincing discussion of how regulatory frameworks have developed and possible implications for future regulatory design.

Hendrik Finger | Journal of Regulatory Economics

“Elegantly and concisely written, [The Political Economy of Pipelines] is in part an essay on economic theory, in part a contribution to comparative economic and business history, and in part a programmatic statement for industry reform. Business and economic historians will find it highly useful, especially in relation to the sections on economic theory and pipelines, which are lucid and insightful.”

Business History Review

Table of Contents

Chapter 1. The New Institutional Economics and Pipeline Transport
Chapter 2. Existing Pipeline Studies and Private Pipeline Capital
Chapter 3. The Economics of Production Cost: Pipelines as Natural Monopolies
Chapter 4. Regulating Pipelines as a Response to Monopoly
Chapter 5. The Essential Contributions of the New Institutional Economics
Chapter 6. Transacting with Common Carriage: The Oil Pipeline Regulations of 1906
Chapter 7. Transacting with Private Carriage: The Gas Pipeline Regulations of 1938
Chapter 8. The Competitive Potential for the World’s Pipeline Systems
Chapter 9. Making Sense of Pipelines: The Lenses of the New Institutional Economics


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