Energy Security and Evolution of Gas Markets

Abstract

Questions of energy security and international gas trade have recently become indissolubly connected. Paradoxically, during the evolution of natural gas markets, concerns about security issues in gas trade were growing at the same time as transaction costs. Market participants have developed several mechanisms of adaptation (vertical integration, mutual penetration of capital and long-term contracts) which should be regarded not as a market failure, but as an essential part of current energy security guarantees. Further gas market evolution will demand a more unified institutional framework to reduce both threats to energy security and transaction costs. This framework should be a result of mutual compromise between all market participants.