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Price Discrimination and Limits to Arbitrage in Global LNG Markets


Type

Working Paper

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Authors

Ritz, Robert 

Abstract

Gas prices around the world vary widely despite being connected by international trade of LNG Some industry observers argue hat major exporters g , Qatar) have acted irrationally by failing to engage in price arbitrage. This is also difficult to reconcile with a perfectly competitive model in which price differences exist solely because of transport costs we show that a model with market power can rationalize observed price differentials and trade flows. We highlight how different features of the LNG market limit the ability and/or incentive of other players to arbitrage, and discuss the potential impact of US LNG exports.

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Keywords

LNG pricing, market power, natural gas, price discrimination

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Publisher

Faculty of Economics

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