Question

Imagine you are the owner of a natural gas company. You can either extract as much of the resource as fast as possible or delay extraction until a future time. Projections indicate that the price of natural gas is expected to rise in the future. What would you do in the present?

Answer 1

If i have the monopoly in the market of natural gas which and natural gas in the product which have inelastic demand which says that a more rise in prices will leads to only small reduction of quantity consumed. If this is the case, you can earn maximum profits from the sale of natural gas. If you extract natural gas as fast as possible, it would be sold at lower prices. If prices are expected to rise in future, you should delay extraction in future such that you gain the maximum profit. Even If in future extraction is delay by a little, there would be more pressure on natural gas prices to go up as shortage would create its prices higher. In present, you should supply natural gas which is less than demand such that prices would rise sudden due to shortage.