The global natural gas (NG) industry has a highly important mission to accomplish in order to make our world better. As the least-polluting and least CO2-emitting carbon fuel, the mission of NG is to expedite the switch from coal to gas and from oil-to-gas as part of the global environmental and climate change mitigation agenda.

The key to understanding the critical role of NG in the transition to a low carbon economy lies in the fundamentals of NG price formation and the mystery of why gas prices do not follow the same rules as other commodities. I have spent many years of my professional life wrestling with this mystery. It is a subject of great controversy among academic researchers, government regulators, producers and consumers. I have been a longtime participant in this controversy through conference presentations, articles and interviews. As such, I have had to dig deeper and deeper into the specifics of natural gas as a commodity and how to assess its market value. This book will present the full scope of my analysis and conclusions that explain the dynamics of NG price behavior and the potential for market failure. It is my contribution to answering the mysteries of NG price formation through a theoretical framework of pricing in the gas sector.

It would be incorrect to say that the transitional mission in the fuel mix is something brand-new for NG. The NG industry already has been effectively carrying out this agenda on a purely competitive economic basis, without any tangible public support. However, this mission now has unprecedented importance by adding the climate change agenda.

In order to successfully fulfill its historic mission, the NG industry has to properly understand the nature of price-related hurdles and to find practical solutions to overcome them. The economic hurdles that prevent NG from becoming the number one fossil fuel are concentrated primarily on the pricing side. Pricing patterns for NG are special and extremely complex, with the potential for economic market failure. Mainstream industry economists have not fully assessed the impact of pricing of NG in assessing its economic role and often disregard this question entirely.