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Global gas prices, including those for Russian gas, are formed based on international gas and petroleum product prices.
There are several key benchmarks on the global gas markets, with two being particularly important:
1. American market (Henry Hub):
- Current price: Adjusted on Monday to $3.2 per million BTU (British Thermal Units).
2. European market (TTF):
- Current price: Increased to $400 per 1,000 cubic meters.
1. Henry Hub - American gas. This is essentially the Henry Hub gas distribution hub in Louisiana. This benchmark plays a leading role in setting natural gas prices in the US, which are traded on the New York Mercantile Exchange. The unit of measurement is British Thermal Units (BTU). To convert the price to the equivalent of 1,000 cubic meters, a factor of 35.8 is used. It is important to note that this price reflects the raw material cost only, without accounting for liquefaction, transportation, and regasification costs. Therefore, consumers in the US pay significantly more for gas.
2. TTF - European gas. This is the main benchmark for gas prices in Europe. TTF stands for Title Transfer Facility, a virtual gas trading platform.
It is worth noting that gas pricing mechanisms are diverse: they include exchange trading (competitive pricing, as on TTF in Europe), oil-indexation (linking gas prices to oil prices), regulated prices, and direct contracts where prices are determined by the balance of supply and demand, which influences global benchmarks, including gas prices and the cost of alternative fuels (gas, oil, coal).
Prices for Russian gas, especially for export markets, have traditionally been heavily dependent on oil-indexation, but now are more oriented towards spot markets and competitive mechanisms, although the link to energy prices remains.
This overview was presented by Alexey Grishchenko, Doctor of Economics, Professor at the Department of Operational and Sectoral Management of the Faculty "Higher School of Management" at the Financial University under the Government of the Russian Federation.
