Simply Unaffordable - How Sky-High Natural Gas Prices Affect International Gas Markets

RBN Energy Blogcast

With international gas prices ranging somewhere between ridiculous and ludicrous since last fall, the entire global trade of LNG is going through an unprecedented period of change as gas-consuming nations try to cope with the current situation and seek protection from tight supplies and high prices in the future. The problems of Europe in securing supplies for the imminent winter have been well documented here and elsewhere in the trade press. In addition to being a major struggle for consumers and a headwind to economic development, there are also numerous, less-obvious consequences of the tectonic shifts in gas fundamentals, including countries’ individual plans for long-term energy supplies, potential tax-related issues, the contractual structures used to transact LNG, and even the assessments of the commodity price itself. These issues aren’t new and, in many cases, have been discussed for years. What’s changed is that extremely high prices have thrown into sharp relief any inefficiency or risk that exposes market participants. In today’s RBN blog, we consider the impact of high global gas prices on countries in Asia and Europe and how pricing mechanisms might be affected.