Inter-Energy Competition and Natural Gas Prices in the United States

This paper provides an analysis of the process within which spot prices in the US natural gas market are determined. While some have argued that the gas "bubble" is the primary explanation of recent movements in gas prices, it is argued here that inter-energy competition is still the driving force behind the formation of us gas prices. In order to see that, it is necessary to ,calculate prices for each fuel that are comparable in relation to their final uses and to take account carefully of seasonal variation in demand and the relation between regional gas markets. The analysis has implications for, among other matters, the likely effects of growing gas demand in the northeastern US. It is also relevant for the European gas industry in relation to the current debate over the introduction of more competition into a largely monopolistic market.