European Gas Prices Continue to Rise Amid Global Market Tensions

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Natural gas pricing, including gas of Russian origin, is determined based on current global gas and oil prices.

There are two main international benchmarks for natural gas pricing: Henry Hub in the U.S. and the Dutch hub TTF Gas.

1. American Market (Henry Hub):

- Current price: Adjustment on Wednesday to $3 per million BTU (British Thermal Units).

2. European Market (TTF):

- Current price: Increase on Wednesday to $640 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 U.S., traded on the New York Mercantile Exchange. The unit of measurement is British Thermal Units (BTU). To convert the price to an equivalent of 1,000 cubic meters, a conversion factor of 35.8 is used. It is important to note that this price reflects the raw cost of the gas, excluding liquefaction, transportation, and regasification costs. Therefore, the final price paid by U.S. consumers is significantly higher.

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.

Gas pricing mechanisms worldwide are diverse, including competitive market-based pricing (such as on TTF in Europe), oil-indexed pricing (linking gas prices to oil prices), regulated prices, and direct contracts where prices are determined by the balance of supply and demand, which affects 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-indexed pricing, but are now more aligned with spot markets and competitive mechanisms, although the link to energy prices remains.

Overview presented by Alexey Grishchenko, Doctor of Economics, Professor at the Department of Operational and Sectoral Management of the "Higher School of Management" Faculty at the Financial University under the Government of the Russian Federation.