European Gas Prices Hit Record Highs Amid Global Market Tensions

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Global gas prices, including those for Russian gas, are determined based on international gas and oil product prices.

Each major gas market has its own benchmark price. There are several key indicators, with two being the most important:

1. American Market (Henry Hub):

- Current price: fell to $2.9 per million BTU (British Thermal Units) on Monday.

2. European Market (TTF):

- Current price: adjusted to $1,150 per 1,000 cubic meters.

1. Henry Hub - American gas. This is a physical gas distribution hub located in Louisiana. The benchmark plays a leading role in setting 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 1,000 cubic meters, a factor of 35.8 is used. It is important to note that this price reflects only the raw material cost, excluding liquefaction, transportation, and regasification costs. Consequently, 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 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).

Russian gas prices, 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 Aleksey Grishchenko, Doctor of Economics, Professor at the Department of Operational and Sectoral Management of the Faculty of "Higher School of Management" at the Financial University under the Government of the Russian Federation.