Cartelization in gas markets: Studying the potential for a “Gas OPEC”

Natural gas is increasingly important as a fuel for electric power generation as well as other uses due to its environmental advantage over other fossil fuels. Using the World Gas Model, a large-scale energy equilibrium system based on a complementarity formulation, this paper analyzes possible future gas cartels and their effects on gas markets in a number of regions across the world. In addition, scenarios related to lower transport costs and decreased unconventional gas supply in the United States are considered.

Research highlights► Effects of a gas cartel along the lines of the Gas Exporting Countries Forum have been analyzed using the World Gas Model. ► When GECF, the Caspian, and the Middle Eastern countries all form a cartel (supra-GECF cartel), the effects are dramatic. ► North America faces changes in prices and consumption when the unconventional gas resource base in the U.S. is diminished. ► In case of supra-GECF cartel Europe sees an increase of $3.69 per million BTU or $91.4 billion in lost consumer surplus. ► Lower transportation costs don't dramatically change prices in most regions except for Europe.