A Comparative History of Oil and Gas Markets and Prices: is 2020 just an extreme cyclical event or an acceleration of the energy transition?
Oil and gas markets seem similar, but have become progressively different over the past several decades. Natural monopoly and cyclical booms and busts are common features of their histories. But oil has been a liberalised global market based on regional and global benchmark prices for several decades, while natural gas market liberalisation and a move to spot and hub-based prices is a more recent phenomenon in Europe, and remains at a relatively early stage in Asia. However, substantial increases in global LNG trade in the 2010s, accompanied by an increase in short term trading and spot pricing, have led to observations that a global gas market is developing. The collapse in oil and (to a less extent) gas demand following the coronavirus pandemic has coincided with, and contributed to, record low oil and gas prices. This extreme cyclical event is likely to accelerate the move to market pricing in Asian LNG, but it remains unclear whether its longer-term consequences will hold back or accelerate the transition away from oil and gas and towards a lower carbon economy.