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The Development of Gas Hubs in Europe

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  • Caterina Miriello
  • Michele Polo

Abstract

This paper investigates the development of wholesale markets for natural gas at the different stages of market liberalization. We identify three steps in the process: wholesale trade initially develops to cope with balancing needs when the shippers and suppliers segments become more fragmented; once the market becomes more liquid, it turns out to be a second source of gas procurement in alternative to long term contracts; finally, to manage price risk financial instruments are traded. We review in detail the different regulatory measures that must be introduced to create an efficient and functioning wholesale gas market. Finally, we analyze the evolution of gas hubs in the UK, the Netherlands, Germany and Italy in terms of market rules and market liquidity. We argue that each of these country cases can be easily located into the evolutionary path we have highlighted at the beginning, with the UK and the Netherlands leading the process, Germany and Italy constrained by limited supply; Italy is also showing an interesting counterfactual.

Suggested Citation

  • Caterina Miriello & Michele Polo, 2014. "The Development of Gas Hubs in Europe," IEFE Working Papers 76, IEFE, Center for Research on Energy and Environmental Economics and Policy, Universita' Bocconi, Milano, Italy.
    • Handle: RePEc:bcu:iefewp:iefewp76
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    References listed on IDEAS

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    Cited by:

    1. Arthur Thomas & Olivier Massol & Benoît Sévi, 2019. "How are day-ahead prices informative for predicting the next day’s consumption of natural gas?," Post-Print hal-04319396, HAL.
    2. Alessandro Rubino, 2016. "Euro-Mediterranean Gas Cooperation: Roles and Perceptions of Domestic Stakeholders and the European Commission," RSCAS Working Papers 2016/53, European University Institute.
    3. Theodosios Perifanis & Athanasios Dagoumas, 2020. "Price and Volatility Spillovers between Crude Oil and Natural Gas markets in Europe and Japan-Korea," International Journal of Energy Economics and Policy, Econjournals, vol. 10(5), pages 432-446.
    4. Dukhanina, Ekaterina & Massol, Olivier & Lévêque, François, 2019. "Policy measures targeting a more integrated gas market: Impact of a merger of two trading zones on prices and arbitrage activity in France," Energy Policy, Elsevier, vol. 132(C), pages 583-593.
    5. Li, Fengyun & Li, Xingmei, 2022. "An empirical analysis on regional natural gas market of China from a spatial pattern and social network perspective," Energy, Elsevier, vol. 244(PA).
    6. Niedrig, Nicolas & Giehl, Johannes & Jahnke, Philipp & Müller-Kirchenbauer, Joachim, 2024. "Market Design Options for a Hydrogen Market," Working Papers 4-2024, Copenhagen Business School, Department of Economics.
    7. Zhang, Dayong & Wang, Tiantian & Shi, Xunpeng & Liu, Jia, 2018. "Is hub-based pricing a better choice than oil indexation for natural gas? Evidence from a multiple bubble test," Energy Economics, Elsevier, vol. 76(C), pages 495-503.
    8. Bastianin, Andrea & Galeotti, Marzio & Polo, Michele, 2019. "Convergence of European natural gas prices," Energy Economics, Elsevier, vol. 81(C), pages 793-811.
    9. Chi Kong Chyong, 2019. "European Natural Gas Markets: Taking Stock and Looking Forward," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 55(1), pages 89-109, August.
    10. Elena Argentesi & Albert Banal-Estanol & Jo Seldeslachts & Meagan Andrews, 2017. "A Retrospective Evaluation of the GDF/Suez Merger: Effects on Gas Hub Prices," Discussion Papers of DIW Berlin 1664, DIW Berlin, German Institute for Economic Research.
    11. Olivier Massol & Albert Banal-Estanol, 2018. "Market Power and Spatial Arbitrage between Interconnected Gas Hubs," The Energy Journal, , vol. 39(2_suppl), pages 67-96, December.
    12. del Valle, Aurora & Dueñas, Pablo & Wogrin, Sonja & Reneses, Javier, 2017. "A fundamental analysis on the implementation and development of virtual natural gas hubs," Energy Economics, Elsevier, vol. 67(C), pages 520-532.
    13. Rubino, Alessandro, 2021. "The political economy of Euro - Mediterranean cooperation in the gas market: The role of domestic stakeholders and the European Commission," Resources Policy, Elsevier, vol. 70(C).
    14. Hupka, Yuri & Popova, Ivilina & Simkins, Betty & Lee, Thomas, 2023. "A review of the literature on LNG: Hubs development, market integration, and price discovery," Journal of Commodity Markets, Elsevier, vol. 31(C).
    15. Akcora, Begum & Kandemir Kocaaslan, Ozge, 2023. "Price bubbles in the European natural gas market between 2011 and 2020," Resources Policy, Elsevier, vol. 80(C).

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    More about this item

    Keywords

    natural gas markets; gas balancing; market liquidity.;
    All these keywords.

    JEL classification:

    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities

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