Tuesday 27 March 2012

More from Gazprom

Here’s a current source of quiet amusement from the treasure-trove that is the Gazprom website. You can view this gem until they cotton on to the problems they might be causing themselves and axe it.

Background: in its ill-fated campaign to preserve oil-indexed gas pricing for long-term gas sales contracts, Gazprom has fiercely maintained that gas prices emanating from spot-market trading (the obvious source of price indices) are unrepresentative or even meaningless, because in some European markets only a modest proportion of the total amount of gas being delivered gets traded in the spot markets or on exchange. Thin trading in Europe is bad.

For their internal Russian markets, however, they’d like to set prices based on exchange-trading over which they probably have quite a significant
*ahem* influence. So in Moscow, thin trading is good, and we read the following:

The application of exchange quotations as market price indicators is one of the main features of a civilized gas market. Past experience shows that 5 to 10 % of the industry output should be traded at an electronic platform for the exchange price to become a benchmark for contract prices ... using modern gas exchange technologies at the Electronic Trading Platform of Gazprom Mezhregiongaz – a trading company of Gazprom.

Civilised market … 5-10% … trading company of Gazprom … Actually, ‘quiet amusement’ is entirely the wrong description for how this grabs an energy-market bore such as myself. It’s bloody hilarious.



Budgie said...

Well, well so Ivan Foreigner tries to look out for himself. Only the English could find that amusing. Everyone else in the world thinks it's perfectly normal. As did the English 100 years ago, before the socialists and Little Englanders made patriotism unfashionable here.

Nick Drew said...

ah well Budgie, but some of us believe in open markets & free trade

it can work, you know

Budgie said...

"Believe in open markets & free trade ..... it can work, you know"

No, I don't "know". Free trade within a nation (assuming a working legal system to protect contracts) is possible.

Free trade globally is not possible without a world government. There will always intrude nationalism to distort trade.

German cars on German roads, French cars on French roads, Italian cars ... you get the picture - even in the EU Single Market supposedly "free" trade area.

That's the reality globally too. And I am constantly surprised by how the English are constantly surprised by it.

Nick Drew said...

I can speak for the markets I know best

sustained and determined nationalistic attempts at preventing free trade prevailing in oil, coal, gas & electricity have failed

one can always identify (a) countries yet to open up - Russian internal market, China, India; (b)hold-out enclaves supported by massive and costly last-ditch efforts, eg France

but the direction of travel - and (to me) the benefits are clear

there can have been few more determined attempts to block than the German effort to stop its gas market opening, or Russia's efforts along the same lines: but they have failed

go to India, HK, S'Pore, Malaysia - they all see the energy future as an open-market one: this may be a long-term vision or much more imminent, but they know what works, they have researched it carefully

Budgie said...

ND, this is an interesting and important discussion. You appear to be saying that "free trade" is best, and we are getting there globally. Actually I am not discussing the merits of 'free trade', so we are at cross purposes. I am discussing culture.

I do say we have not got 'free trade' now, not even in the EU, let alone globally. You rather (perhaps inadvertently) confirm this. Further, I do not think we will get genuine global 'free trade' without a world government, and probably not even then. Other nations are more nationalistic, and unlikely to change.

Even the concept of 'free trade' is not independent of culture, which is why I put it in quotation marks. I believe that other cultures tend to see 'free trade' as simply an English/Anglo-Saxon ploy anyway.

I am extremely concerned that 'we' (the UK) fail so often in negotiations (perhaps not primarily concerning 'free trade') with foreigners because we are blinded by our own cultural assumptions.

The outcomes of our negotiations with the EU at apparatchik level (where most agreements are made) is an example of our failures. We meet in Brussels with all the EU nation's bureaucrats. There is an impasse. We concede a point expecting a reciprocal concession from the others. But this is a pure cultural assumption. We are then bewildered when the goal post is moved against us.

Perhaps this is too long winded. Which is why I normally shorten it to a jeer about the peculiar English expectation that Johnny Foreigner will look after the English rather than his own country. Johnny Foreigner will look after his own, not us, and we should stop being surprised by this revelation.

Nick Drew said...

OK well let's hark back to the post and watch for how successfully Johnny Gazprom defends his oil-indexed pricing over the next few years

he'll try, I grant you !

but these particular goalposts don't belong to him