EMF Publications


Image of Cover

EMF-23: Prices and Trade in a Globalizing Natural Gas Market

Report

Author
Hillard Huntington - Stanford University

Published by
EMF Report 23, Vol. 1
September 2007


Natural gas use will increase faster than other major fossil fuels around the globe over the next several decades. Many consider this fuel as a bridge to a more environmentally friendly world. It is abundant and produces lower sulfur dioxide, nitrous oxide, particulate and carbon dioxide emissions relative to oil and coal. World energy markets, however, have pushed natural gas prices sharply higher over the last several years. At the same time, producers and consumers have had to cope with significant price volatility. Further-more, major basins are often located in remote areas where they are isolated from key demand centers. Major investments will be required to access these sources and link them to the major demand centers through an international trading system. These developments underscore the need for an international perspective to understand future natural gas markets.

This report summarizes the EMF 23 study on prices and trade in a globalizing natural gas market. The study compared results submitted by eleven different modeling teams for standardized scenarios with common input assumptions across models. Study participants included model developers and users from industry, government, universities and other research organizations in the United States, Europe and Asia. The group made several important conclusions:

  • Future imports will grow as consumption outstrips production in the United States, Europe and Asia.
  • Rising natural gas imports will enable some countries (especially in Europe) to cope better with insecure supplies if their markets are connected to diverse supply sources.
  • Energy independence or controls on total imports may not be the most cost effective approach for enabling energy security.
  • The long-run natural gas price path will move with world crude oil prices over the next two decades, although there is not a fixed relationship between the two energy prices.
  • Future imports will grow as consumption outstrips production in the United States, Europe and Asia.
  • Rising natural gas imports will enable some countries (especially in Europe) to cope better with insecure supplies if their markets are connected to diverse supply sources.
  • Energy independence or controls on total imports may not be the most cost effective approach for enabling energy security.
  • The long-run natural gas price path will move with world crude oil prices over the next two decades, although there is not a fixed relationship between the two energy prices.