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Natural gas pricing should be as critically important to the general public as it is to industry specialists. Pricing is the basis of balancing the interests of European and Asian consumers of power and electricity with those of the limited number of potential suppliers of natural gas. Given that natural gas is a foundational transition fuel source that will not be supplanted by renewals for many, many years, the consequences of market failure from incorrect pricing mechanisms could result in the industry missing the new investment cycle. In addressing the critical balancing role of natural gas pricing, ‘Foundations of Natural Gas Price Formation'presents an in-depth analysis of the fundamentals of natural gas price formation and outlines the distinctive characteristics of natural gas that make it a unique commodity by examining the specific factors underpinning gas pricing that result in a hybrid pricing system special to natural gas. The book argues that the patrons of spot pricing through gas hubs are promoting an incorrect understanding of gas markets that will lead to market failure and to potential critical supply shortages in the near future. ‘Foundations of Natural Gas Price Formation'defends the system of oil-indexed pricing as an accurate, market-based mechanism that has stood the test of time.

This is the first book to address the issues of affordable power, sustainable energy, and reduced environmental impact through the science of energy pricing. Looking at the availability of natural resources from an engineering perspective, and determining how they can be priced to achieve sustainability in the energy sector, is the aim of this groundbreaking new work. Most current models used in energy pricing are based on linear analyses. While these models work well for targeted scenarios within a short time frame, they do not provide one with a scientific tool that can include many facets of the information age. The existing models do not include environmental sustainability in an integrated fashion. This is mainly because environmental costs are still considered to be intangible, and intractable with conventional economic analysis tools. Though one existing model acknowledges some possible theoretical truth to concerns expressed about the onset of'peak oil'—the period in which new oil production must begin a decline of unknown and indefinite duration —this model has little or nothing to say about continuing practices in the extraction and production of fossil fuel that are themselves based on denying any significance or role for such thinking in the immediate future. A serious limitation of that discourse is its insistence on polarizing opinions'for'or'against'environmental sustainability, peak oil, and affordable energy prices. This book proceeds instead to isolate the absence of any agreed criteria for what would constitute inherently sustainable development and examines the main outlines of the history and political economy of energy resource exploration and development since the 1850s from this standpoint. It proposes specific directions in which to take some of the leading alternatives and amendments to current energy pricing practices (as well as some of the most promising energy development alternatives) in order to fulfill the time criteria required for an inherently sustainable trend. The author shows how, and why, identifying unsustainable practices and consequences can make a case for closing down particular oil and gas production operations, while averting the time-wasting approach of trying to fix what really has gone beyond fixing. However, it is possible, necessary, and actually far better to replace these methods with newer, scientifically based methods for achieving overall energy sustainability.