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Main drivers of natural gas prices in the Czech Republic after the market liberalisation

Publication at Faculty of Mathematics and Physics, Faculty of Social Sciences |
2013

Abstract

One of the goals of the European Commission in the energy sector is creating a single competitive European market. The decision to liberalise energy markets has far-reaching consequences not only for gas companies, but also for the rest of the real economy in view of the fact that natural gas is being used as an important primary energy source in several sectors of production and in the power industry.

We aim to answer how liberalisation/unbundling have influenced gas pricing/prices in the Czech Republic. We investigate the individual components of end-customer gas prices according to the value-chain and we define and structure the drivers of these components.

We use a case study from the Czech Republic, one of the Central and Eastern European countries, which, contrary to the old Member States, is buying most of its gas from one supplier (high import dependence, low supply diversity) and where the transmission and distribution network is characterised by a sufficient contractual and physical capacity. We stress that next to basic conditions on the European gas market (import dependency on external gas producers) legal and institutional conditions and the initial market structure of each Member State are also important for the results of the liberalisation.