WHAT COULD BE THE DETERMINANTS OF FUTURE GAS PRICES?
If it is correct that even in liberalised and competitive markets gas and oil prices will remain aligned over the longer term, then abandoning formal contractual linkage between the products should not pose problems for market stakeholders. Thus a conviction that the long-term alignment of gas prices with oil prices seen in the past will be a good guide to the future, should remove the resistance of Continental European market players to moving from oil-indexed contracts to short-term prices set at market hubs. But short-term pricing would create a much more competitive gas market which is not in the interest of dominant incumbent players. And at a time of high oil prices, it will be difficult to persuade incumbents that it is in their interest to make such a change. Put another way, gas market stakeholders and the financial community may not be prepared to accept DG COMP’s conclusion that ‘there is no clear commercial advantage between oil indexed and gas indexed contracts’ (see EU En
