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Energy shifts to a buyer’s market

Nicholas Newman eniday October 2017
Oilfield worker

A major shift of power is underway in the world’s oil and gas markets…

Until 2008, oil and gas producers were “market makers.” This meant they could fix prices and decide their output’s final destination. Also, until recently, oil and gas companies restricted gas wholesalers from re-selling gas, which they had bought from Russia’s Gazprom and Algeria’s Sonatrach to other markets. Today, such practices are fading as European and Asian markets bring to an end such anti-competitive practices.

Why a buyer’s market?

The ability of oil and gas producers to dominate the market has been weakened by current supply and demand trends. On the supply side, there is a world glut of oil and natural gas, as shown in the build-up of huge inventories caused by new fields coming online and the success of fracking, which has turned the US into a net energy exporter. The global LNG trade reached a record high of 258 million tonnes (MT) but liquefaction capacity at 339.7 MTPA (million tonnes/year) far exceeded the amount of LNG traded on world markets in 2016, according to the (International Gas Union) IGU World LNG Report.

Gas in competition with oil

Many countries, including MaltaMexico, and the US are substituting environmentally friendly cleaner gas for oil and coal. Already, CaliforniaSouth Africa, and the UK are showing growing interest in gas for power generation, to provide backup power at peak times and when renewables are not available. Similarly, energy-intensive industries including plastics, petrochemicals and steel making are turning to gas and displacing oil and coal. In addition, regulators are ending many of the restrictive practices that hurt customer interests, such as cartels. So, market power is shifting away from producers. Read more

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