Natural gas prices

The expansion of natural gas production in the United States keeps domestic natural gas prices at very low levels. But increase of the US output has only a limited impact on prices in other world regions. In Europe natural gas three times more expensive. In Japan - the world's largest single-country gas importer - prices five times higher than in the US. Such a large price gap last seen only in late 1970s - early 1980s.

Natural gas price rose sharply in Japan due to lack of supply of other energy sources after the 2011 meltdown in Fukushima. In the late 2014 natural gas in Japan became more expensive than the crude oil in terms of energy equivalent*, as of Mar 2015 it costs 50% more. That explains Shinzo Abe's government's persistent attempts to revive the nuclear generation industry. Despite the public opinion, which wants to phase out nuclear power, last week a panel of ruling Liberal Democratic Party approved a proposal that would boost stable "baseload" energy supplies - nuclear, coal, hydroelectric and geothermal - to about 60 percent by 2030 from 40 percent now. 

In the US natural gas still very cheap compared to oil, even after the significant oil price fall in recent months. And in Europe the prices for oil and natural gas in Jan-Feb 2015 have reached the equilibrium. As long as European energy markets stay highly dependant on the Russian gas exports, prices for natural gas in Europe tends to be closer to the crude oil price due to the Gazprom's monopoly policy, that bounds one price to another on the energy equivalent basis (see the last chart in the bottom of the page). 

Sources: World Bank Commodity Price Data (Pink Sheet), April 2015, EIA Best Estimates of US Total Natural Gas Gross Withdrawals, Global Energy Statistical Yearbook 2014

* Note: to quantify crude oil, natural gas and natural liquids amounts on the same basis, barrels of oil-equivalent (BOE) are used. Natural gas volumes are converted to barrels on the basis of energy content. To convert the natural gas prices quoted in US Dollars per million of british thermal units (mmBTUs) we have used the BP's conversion factor of 0.18.