Any Reason to Fear an International Gas Producers Cartel?

Michael Giberson

Reuters reports from Moscow:

MOSCOW — The world’s top gas exporting nations will set up a formal organization at a December summit in Moscow, a Russian official said on Wednesday, but denied the new body will seek to copy OPEC’s production quotas.

“No one is planning to regulate gas production volumes. It is a crazy idea,” Deputy Energy Minister Anatoly Yanovsky told reporters.

He said energy ministers from 16 gas exporting nations would meet in Moscow on Dec. 23, as planned, to sign a charter for the new organization….

The idea of an OPEC-style gas group has sent a nervous tremor through the European Union and the United States, which have argued the market should set gas prices. Both have warned the cartel could pose a serious danger to global energy.

Even assuming that the Gas Exporting Countries Forum becomes a formal cartel, the U.S. should not be affected much in plausible scenarios, at least for many years. While the EIA has forecast increasing LNG imports over the next 20 years, the forecast may not adequately reflect increased access to domestic supplies. It is likely that increased production from domestic resources – particularly gas shale developments – will keep prices below current world LNG price levels. If a GECF successor organization manages to coordinate higher world LNG prices, at most there will be a slight price consequence in the U.S. which will promote additional domestic gas development.

Longer term, on the assumption that GECF turns itself into an effective cartel (and that may not be a plausible assumption), the significance for the U.S. is that it becomes more likely that an Alaskan gas pipeline actually gets built.

Europe may reasonably find the topic a bit more troublesome, since LNG provides a significant alternative to natural gas piped in from Russia.

On a related note, the Houston Chronicle reports, “OPEC’s divisions manifest as oil prices plummet.”


3 thoughts on “Any Reason to Fear an International Gas Producers Cartel?

  1. Mike,

    I fail to see why this is even an issue. The US is going to reduce CO2 emissions by 80% by 2050, to “save the planet”. On a population adjusted basis, that’s an 87% reduction from whatever base is chosen. Under that scenario, the US will be dramatically decreasing its use of natural gas, as well as coal and oil, over the next 40 years.

    Presumably, once the US has committed to “save the planet”, the rest of the nations on the globe will follow our sterling example, thus reducing future demand for all fossil fuels. I’m sure the OPEC countries have been waiting anxiously for the US to commit to destroying their market.

    Of course, if the rest of the nations on the globe do not choose to follow our sterling example, then the planet cannot be saved (assuming that it could otherwise have been saved), regardless of the fervency of our belief and the magnitude of our commitment.

  2. Mike,

    I fail to see why this is even an issue. The US is going to reduce CO2 emissions by 80% by 2050, to “save the planet”. On a population adjusted basis, that’s an 87% reduction from whatever base is chosen. Under that scenario, the US will be dramatically decreasing its use of natural gas, as well as coal and oil, over the next 40 years.

    Presumably, once the US has committed to “save the planet”, the rest of the nations on the globe will follow our sterling example, thus reducing future demand for all fossil fuels. I’m sure the OPEC countries have been waiting anxiously for the US to commit to destroying their market.

    Of course, if the rest of the nations on the globe do not choose to follow our sterling example, then the planet cannot be saved (assuming that it could otherwise have been saved), regardless of the fervency of our belief and the magnitude of our commitment.

  3. Ed, I think most “save the planet” scenarios will lead to more natural gas consumption, at least over the next 5 to 10 years and probably longer. A carbon tax or the costs of a CO2 cap-and-trade system will fall more heavily on coal-fired electric power and induce a shift. Perhaps in 10 years there are additional nukes to replace coal, or carbon capture technologies at low enough costs, but at least for that long natural gas remains “the environmentalists’ favorite fossil fuel”, as it has been called.

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