European Gas Prices Surge Amid Global Market Tensions

© ООО Региональные новости

Global gas prices, including those for Russian gas, are formed based on world gas and oil product prices.

World gas markets have their key price benchmarks. There are several reference indicators, two of which are primary:

1. American market (Henry Hub):

- Current price: dropped to $2.6 per million BTU (British Thermal Units) on Monday.

2. European market (TTF):

- Current price: fell to $740 per 1,000 cubic meters.

1. Henry Hub - American gas. This is the Henry Hub gas distribution hub in Louisiana. This benchmark plays a leading role in shaping natural gas prices in the US, 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 taking into account 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 around the world are diverse: they include exchange trading (competitive pricing, as on TTF in Europe), oil-indexation (linking the price to oil), regulated prices, and direct contracts where the price is determined by the balance of supply and demand, influencing 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 are now 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 Operations and Industry Management of the Faculty of "Higher School of Management" at the Financial University under the Government of the Russian Federation.