Regulation, Supply and Demand
The Loyola de Palacio Series on European Energy Policy
Gas is a commodity and goes to the market. This should not astonish anyone since coal and oil, the two other fossil fuels, have been delivered by markets for ages. Natural gas is, however, less easily marketed because it flows inside closed pipes that have a ‘big’ efficient size and are very costly to replicate. The infrastructure of the gas network then operates as a barrier to open trade. With a small nascent gas demand the gas network is likely to be a natural monopoly and gas sources only one or very few. With a large, mature gas demand the gas network should encompass numerous facilities with alternative routes and several rival gas sources should candidate to feed consumption. In the latter case, opening demand to alternative suppliers is more easily feasible and makes sense. With nearly 600 million inhabitants and decades of gas usage in most of the Member States, the EU gas industry is not on average an infant industry and opening gas trade at the continental scale is not wrong, however, with different maturity levels of gas networks, gas sources and gas demand the grand opening of gas trade in the EU will not be simple. In practice, the institutional arrangements to opening trade in the gas industry are themselves various and numerous, and, unsurprisingly, the process for opening the gas sector has been significantly different among different regions of the world. Notably, the latecomer EU is not following the pioneering USA.