In a recent working paper, we described how some large energy companies have been responding to the evolution of the European gas market. In particular, we looked at the strategic dilemma facing large midstream companies, which have been struggling in a classic business squeeze as they face competitive threats from upstream and downstream rivals, as well as big changes in how their customers are behaving.

In essence, the way the European wholesale gas market works has fundamentally changed. Demand is at best stagnant, held back by uncertainty over the strength of the economic recovery from the financial and sovereign crisis of 2008–12, as well as by greater energy efficiency and the relocation of production. Furthermore, there has been a marked increase in liquidity and price transparency at major European hubs, which are now determining the prices achievable for midstreamers. This development has led, in turn, to the steady disappearance of traditional geographic and seasonal pricing spreads.

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