The model shows where the gas prices in the 1990s came from and where they might go on an annual averaged basis for this decade and in the future. The results are indicative of what has happened in California and what might happen in the future of electricity. This model is a dozen-equation, simultaneous supply and demand model. In it, the supply of reserves generated production, which was sold through contract and ultimately spot markets for distribution to industry, commercial users, household users, and the electric power industry. One iteration of this model was published in the journal Energy and Resource Economics.
Reserves are the inventory source that is to be depleted from in-ground reservoirs.
The reserves are refined into clear, dry methane and put into local and interstate pipelines. According to the Department of Energy, during the late 1970s and early 1980s, production was large it exceeded 20 trillion cubic feet a year for a substantial number of years within that time. The amount declined to 2 or 3 trillion cubic feet less, but then production increased until it reconverged on 20 trillion cubic feet in the late 1990s. Thus, it looks like this was a slightly smaller industry for the last half of this period. It also looks as if sufficient reserves were accumulated to replace the production as it took place so that the total known reserve base remained relatively constant over the last half of the period, after substantial depletion in the first half.