Pricing of Natural Gas in the West European Market

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Abstract
Since the mid-1970s, pricing of natural gas in western, Europe, both at the import level and at the final consumer level, has been monopolistic, with virtually all the monopoly rent accruing to the producers and their governments. Since the late 1980s, the pricing modes have been experiencing strain. Producers are disillusioned by stifled market growth and unused production capacity. Simultaneously, the roles of the national transmission companies as guarantors of market stability are being questioned and diluted. This paper considers the alternative arrangements for pricing gas in western Europe that may emerge during the 1990s and explores the ensuing implications for market development.

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