Natural Gas Pricing and Competitiveness : the impact of natural gas prices upon the industry’s dynamics

Abstract

It was witnessed a shale gas revolution in United States in the last few years that decreased gas prices at levels that offer the country an unforeseen competitive advantage. Shale gas might be a game changer in the United States’ economy, driving the reindustrialization of the country. However, the impact of shale gas development in United States is much larger than its boarders: it changes the dynamics of the global industry. In this context, the future evolution of the gas prices is of a crucial importance. Prices differences in the gas regional markets have created competitive advantages for gas based industries. Even if gas price is not the only driver of the industry's dynamics, it is an important factor and certainly it is the trigger for new investments. However, if a convergence in the gas prices will soon take place, the whole reindustrialization process in US is being overstated. Different studies on this issue have been preceded, but a clear, comprehensive and coherent view is still lacking. Then, this dissertation approaches two main controversial topics in the industry today: gas prices and their impact on the industry. It has the objective of (i) providing a global overview upon the gas pricing in all regional markets in the geopolitical context, (ii) developing a typology based on drivers and constrains for achieving a global gas price, (iii) analyzing the importance of gas price for the industrial competitiveness and (iv) assessing the actual impact of gas price on the industry’s welfare. The conclusions emerged from this study are that the gas price differences between the main regional markets will persist in the upcoming years, conferring thus an incentive to gas based industries to invest in US and profit of the cheaper gas. However, cheap gas is not the only condition for industrial competitiveness, even though it is an important element among many others. Therefore, very few countries present a high competitive advantage for the gas based industries, US being today the most important one. Nevertheless, the industry’s dynamics cannot be explained by energy, even though it is one of the factors that heavily count in decision making process.