By Jove Gurung
The Global Gas Market
Introduction
The global gas market refers to the worldwide trade and consumption of natural gases, a
hydrocarbon gas mixture primarily composed of methane. The global gas market is a billion
dollar industry with high demands rising every year and is said to grow by an average of
1.6% annually between the years 2022-2026 (International Energy Agency, 2023). Unlike oil
which has a unified global price, natural gas has three primary prices. The U.S price, the
european price and the asian price, with U.S being the largest producer of natural gas in the
global market. The geopolitical events within these continents can significantly change the
prices of natural gas.
In this essay we will be analysing the global gas market by using the price elasticity of
demand and supply to explain the movement of gas prices for the years between 2000 and
2023. Before we analyse the global market, we have to understand the different factors
affecting the demand and supply of natural gas that change the dynamics of the global
market.
Demand:
❖ Industrial consumption
Natural gas is a major source of energy for industries, the annual development in
industries creates more demand for natural gases which leads to an increase in gas
price. An example of this can be the significant growth of Chinese industries. The
significant development of industries in China lead to higher demands of natural gas.
❖ Residential and commercial use
Household use for natural gases increases every year with the rising demands for air
conditioning and heating purposes. As the population increases every year so does
the demand for natural gases in order to generate energy for household appliances
and commercial use.
❖ Transportation sector
Since natural gas is relatively cheaper and cleaner than petroleum and diesel, natural
gas is preferred. Hence, there is always a demand for natural gas in the
transportation sector.
❖ Global demand
Emerging economies such as China, have a high demand for natural gases. The 14th
five year plan of China proposes a transitional change towards green energy, leading
to the development of new technologies for energy storage that will prevent future
power shortages and cuts (Bataille et al., 2023).
Supply:
❖ Geopolitical stability:
Geopolitical situations such as war, pandemic, sanctions etc can disrupt the supply
chain of natural gas and affect the supply of the global demand
❖ Global demand
The global demand of natural gas affects the supply as the producing countries (eg.
Russia, Iran, Qatar,etc) has the decision to either extract and export or retain for
domestic purposes.
❖ Storage facilities
Inorder to balance the seasonal demand, proper storage facilities should be
developed in order to sustain the global demand when its high.
❖ Export and import policies
Restrictions and sanctions can halt the supply of natural gases in the global market.
Warring nations can either halt the supply or be restricted from accessing resources
from other nations.
War on Iraq (2003-2011):
The United States of America Invaded Iraq in 2003 had significant change in the global
supply chain of gas and oil. Iraq is one the world's largest gas producers ranking at 12th in
the world, with nearly 131 trillion cubic feet of natural gas reserves. Due to this the price of
gas had risen by more than $1.50 in the year 2003 and continued to rise to $8 per gallon in
the year of 2008 (Elving,2022).
Oil companies began hoarding on gas reserves due to the uncertainties of war, creating a
low supply of gas in the global market. The war resulted with long term negative effects that
affected the development of Iraq even to this day.
In the above figure we can see that during the duration of the war on Iraq, supply of natural
gases was lower than demand. Which resulted in demands being higher, resulting in the
price of gas increasing.
Global recession (2007-2009):
After the great depression in the 1930s, the global recession was the most significant
downturn in the global market. Many people were unemployed due to the recession with
the market almost collapsing, On September 29, 2008. The Dow Jones fell nearly 778 points
in one day. It was the largest point drop in history until the market crashed in March 2020 at
the start of the COVID-19 pandemic. The global recession was caused by excessive mortgage
loaning. Loaners would provide mortgage loans to people who wouldn't qualify for a
mortgage loan (THE FINANCIAL CRISIS INQUIRY COMMISSION, 2011).
Due to the financial crisis, the price of gas and oil drastically decreased. Natural gas prices
decreased from $12.69 to $4.52. Low demand results in excess supply, due to which the
price of gas and oil decreased drastically.
In the above figure during the global recession, the demand for gas was very low. Which
resulted in supply being greater than demand, resulting in lower gas price.
Spike in price of gas during 2012:
In the year of 2012, due to the disturbance in production from natural disasters, refinery
accidents and shutdowns of pipelines, prices of gas reached a record high $4.27 per gallon.
New sanctions were implemented in the middle east during 2012, which resulted in political
tensions and higher gas prices (“2012 Gas Prices Most Expensive on Record”, 2015). Due to
these factors gas supply was lower than demand creating a nationwide shortage.
In the above figure, supply drastically decreased resulting in shortage of gas. High demand
for gas during this period resulted in gas prices spiking very high.
Covid-19 pandemic:
Demand for gas plummeted during the covid 19 pandemic due to the global lockdown.
Production of natural gas decreased due to low demand inorder to balance the demand and
supply of gas in the global market.
In the above figure, in order to maintain a balance with the demand and supply chain the
gas producers decreased supply inorder to prevent excess supply of natural gas.
Russian-Ukraine war: (2014-currently ongoing)
In the above diagram, we can observe the supply drastically decreasing during the invasion
of Ukraine. When supply was low, demand increased leading to higher gas prices in the
global market.
Implication of price changes for the UK households:
Natural gas is one the major sources of generating electricity in the UK. Almost 50% of its
natural gas is imported from the international market, with that being said the recent surge
in the price of natural gas has also increased the energy bills of British households.
Citizens are looking for ways to improve energy efficiency inorder to tackle the increasing gas
price, with energy prices expecting to rise by 30% in 2022.
Daily use of gas (cooking, heating, electricity, etc) creates demand for gas. Even if the prices
are high, consumers will still pay a higher price to sustain their daily activities. Meaning
demand for gas is elastic.
Works Cited
Bataille, Chris, et al. “Inside China's 2023 Natural Gas Development Report - Center on
Global Energy Policy at Columbia University SIPA | CGEP %.” Center on Global Energy
Policy, 11 September 2023,
https://www.energypolicy.columbia.edu/inside-chinas-2023-natural-gas-developmen
t-report/. Accessed 10 December 2023.
Elving, Ron. “Surging gasoline prices bring back memories of past energy wars.” NPR, 13
March 2022,
https://www.npr.org/2022/03/13/1086061029/gasoline-prices-political-effects-araboil-embargo-iran-shock. Accessed 10 December 2023.
THE FINANCIAL CRISIS INQUIRY COMMISSION. 2011.
International Energy Agency. “Medium-Term Gas Report 2023 - Including the Gas Market
Report, Q4-2023.” NET, 1 October 2023,
https://iea.blob.core.windows.net/assets/f2cf36a9-fd9b-44e6-8659-c342027ff9ac/M
edium-TermGasReport2023-IncludingtheGasMarketReportQ4-2023.pdf. Accessed 10
December 2023.
“2012 Gas Prices Most Expensive on Record.” AAA Oregon/Idaho, 2015,
https://info.oregon.aaa.com/2012-gas-prices-most-expensive-on-record/. Accessed
10 December 2023.