Almost need to be a trader to make much sense of the gas market.
It appears as though there is one price for gas in Europe? In other words, no separate prices for LNG and pipeline varieties. This doesn't really make sense to me. Surely they're not fungible?
The exchange-traded prices in the Netherlands are for pipeline gas, surely? (exported from the Netherlands hub via a vast European network of pipes)
So the price of gas for export at the Henry hub in Louisiana is for LNG, whereas the Dutch futures price is for pipeline gas, so we're comparing apples with, erm, liquified apples? No?
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At least I learned something today...
US gas at Henry hub is priced using BTUs, British Thermal Units (or if you're from London, BFUs, British Fermal Units).
Whereas the Dutch futures are priced using megawatt-hours, which is why European prices look so expensive compared to US prices, megawatt-hours being roughly 3* a British fermal unit.
Divide the price of the Dutch futures, let's say 50 Euros, by 3ish to arrive at the BTU equivalent, say 16, and then divide by the Henry hub export price, say $4, to arrive at the conclusion that US gas is 4* more costly when it arrives in Europe (assumed dollar/euro parity for simplicity).
But see comment above i.e. are we comparing prices for two gas products that are not fungible?
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It is almost impossible to find the price Europe was paying for piped Russian gas. Almost as if mention of it has been deliberately erased from the internet. Now who would do such a thing?
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Nobody should be reading Politico. Not when they blame the Russians for having their own pipeline blown up in an act of terrorism by an as yet unidentified Western government (USA).
Politico is a Western government propaganda shiterag which cannot be trusted (one of many).
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It's blindingly obvious that US LNG will cost more in Europe due to the cost of getting it here. So how is anyone identifying the price Europeans have to pay as "unfair"? 'Profiteering' is an emotive word suggesting wrongdoing, but a trader's job is to trade, and if he/she can get a higher price from one jurisdiction over another, isn't technically doing anything wrong. He/she is under no moral obligation to make sure Europe is 'looked after'.
That is the job of European politicians, who are failing their voters in two ways:
1) Having strategic control over gas storage levels is not possible when you've sold off all the state-owned gas companies to the private sector. You told us all it was a great idea. But was it?
As Bruce Forsyth famously said in the pilot episode of his failed economics-themed gameshow, "What does state ownership give you? Strategic control!"
2) Nobody in Europe voted for one single politician who stood on a platform of making European consumers pay unnecessarily high gas prices just so our governments can attempt to crash Russia's economy. Which begs the question, why are our politicians attempting to do so?
One of Ian's links (I can't remember which one) arrives at an article in which Mario Draghi bemoans the fact that "for the first time since the Cold War we are in fear for our existence" and he doesn't mean Russia invading Europe, he is referencing the collapse of European industry. Yet still the ideologues/mentallers/fascists at the European Commission insist on cutting off our noses to spite our faces. Or freezing in our beds so the European commissioners can save face. None of us voted for that: a point that I believe JD Vance sort of made at Munich the other day.
To reply to my own question about fungibility, it may be something like the following?
The traders/brokers don't necessarily care whether the delivery is of LNG or piped gas.
All the ultimate buyer (or agent acting on behalf of the buyer) cares about is can he provide let's say a thousand megawatt-hours to his customers (domestic/industrial). To him it's all the same stuff: gas. As long as it gets delivered on time, he doesn't care.
The risk lies with the seller? He has contracted (on spot or futures market) to deliver a thousand megawatt-hours. Now it is up to him to go out and find the physical gas to back up that thousand megawatt-hours, whether that be from a LNG source or piped source?
This makes sense to me, except there is an assumption that the ultimate buyer is indifferent to whether delivery of the gas is piped or LNG. Surely he won't be? Storage capacity, of either form, gaseous or liquid, will not be infinite.
Nope, I'm still not sure the wood and the trees are the same thing...
Surely it must be that the exchange-traded stuff (in Europe) is piped, and the LNG trading is carried out off-exchange?
Anyway, it's time for football (not just a matter of life and death...)
Almost need to be a trader to make much sense of the gas market.
It appears as though there is one price for gas in Europe? In other words, no separate prices for LNG and pipeline varieties. This doesn't really make sense to me. Surely they're not fungible?
The exchange-traded prices in the Netherlands are for pipeline gas, surely? (exported from the Netherlands hub via a vast European network of pipes)
So the price of gas for export at the Henry hub in Louisiana is for LNG, whereas the Dutch futures price is for pipeline gas, so we're comparing apples with, erm, liquified apples? No?
–––
At least I learned something today...
US gas at Henry hub is priced using BTUs, British Thermal Units (or if you're from London, BFUs, British Fermal Units).
Whereas the Dutch futures are priced using megawatt-hours, which is why European prices look so expensive compared to US prices, megawatt-hours being roughly 3* a British fermal unit.
Divide the price of the Dutch futures, let's say 50 Euros, by 3ish to arrive at the BTU equivalent, say 16, and then divide by the Henry hub export price, say $4, to arrive at the conclusion that US gas is 4* more costly when it arrives in Europe (assumed dollar/euro parity for simplicity).
But see comment above i.e. are we comparing prices for two gas products that are not fungible?
–––
It is almost impossible to find the price Europe was paying for piped Russian gas. Almost as if mention of it has been deliberately erased from the internet. Now who would do such a thing?
–––
Nobody should be reading Politico. Not when they blame the Russians for having their own pipeline blown up in an act of terrorism by an as yet unidentified Western government (USA).
Politico is a Western government propaganda shiterag which cannot be trusted (one of many).
–––
It's blindingly obvious that US LNG will cost more in Europe due to the cost of getting it here. So how is anyone identifying the price Europeans have to pay as "unfair"? 'Profiteering' is an emotive word suggesting wrongdoing, but a trader's job is to trade, and if he/she can get a higher price from one jurisdiction over another, isn't technically doing anything wrong. He/she is under no moral obligation to make sure Europe is 'looked after'.
That is the job of European politicians, who are failing their voters in two ways:
1) Having strategic control over gas storage levels is not possible when you've sold off all the state-owned gas companies to the private sector. You told us all it was a great idea. But was it?
As Bruce Forsyth famously said in the pilot episode of his failed economics-themed gameshow, "What does state ownership give you? Strategic control!"
2) Nobody in Europe voted for one single politician who stood on a platform of making European consumers pay unnecessarily high gas prices just so our governments can attempt to crash Russia's economy. Which begs the question, why are our politicians attempting to do so?
One of Ian's links (I can't remember which one) arrives at an article in which Mario Draghi bemoans the fact that "for the first time since the Cold War we are in fear for our existence" and he doesn't mean Russia invading Europe, he is referencing the collapse of European industry. Yet still the ideologues/mentallers/fascists at the European Commission insist on cutting off our noses to spite our faces. Or freezing in our beds so the European commissioners can save face. None of us voted for that: a point that I believe JD Vance sort of made at Munich the other day.
To reply to my own question about fungibility, it may be something like the following?
The traders/brokers don't necessarily care whether the delivery is of LNG or piped gas.
All the ultimate buyer (or agent acting on behalf of the buyer) cares about is can he provide let's say a thousand megawatt-hours to his customers (domestic/industrial). To him it's all the same stuff: gas. As long as it gets delivered on time, he doesn't care.
The risk lies with the seller? He has contracted (on spot or futures market) to deliver a thousand megawatt-hours. Now it is up to him to go out and find the physical gas to back up that thousand megawatt-hours, whether that be from a LNG source or piped source?
This makes sense to me, except there is an assumption that the ultimate buyer is indifferent to whether delivery of the gas is piped or LNG. Surely he won't be? Storage capacity, of either form, gaseous or liquid, will not be infinite.
Nope, I'm still not sure the wood and the trees are the same thing...
Surely it must be that the exchange-traded stuff (in Europe) is piped, and the LNG trading is carried out off-exchange?
Anyway, it's time for football (not just a matter of life and death...)
Isn’t US shale gas running low? Isn’t that the gas that becomes LNG? In the oil industry isn’t gas the fourth or fifth stage of oil extraction?