To better understand the evolving outlook for LNG and its role in the U.S. gas market, Fortnightly assembled a group of LNG specialists with various perspectives on the issues.
Pipelines: Are Regulators in for the Long Haul?
An economic perspective on long-term contracting for gas pipeline service.
rationally and efficiently in adapting to the more open and competitive environment. We should expect to see more interest in long-term contracting in the future if and when the price for short-term transactions starts to rise because of scarcity in regional pipeline capacity. But other than this development, the lower preference for long-term contracting by shippers is compatible with their self-interest. More important, shorter-term transactions have fostered a more efficient and socially desirable natural-gas industry.
Advocates of long-term contracting have not made a case for their position, which comes across more as self-serving than anything else.
1. As defined here, although other market observers may disagree, long-term contracts have time durations of 5 years or more.
2. EIA’s Annual Energy Outlook 2005 .