Global gas pricing entering ‘a new era’ of market-based trading dominance – IGU

• The IGU says natural gas is evolving into a globally traded commodity, increasingly governed by market fundamentals rather than long-term oil-linked contracts.
• Gas-on-gas competition now determines almost half of global natural gas consumption, underscoring a two-decade shift away from oil-linked contracts and regulated pricing mechanisms.
• Global wholesale gas prices fell sharply in 2024, averaging $4.88/MMBtu compared with the crisis-driven peak of $9.45/MMBtu in 2022, as markets stabilised following the energy shocks triggered by Russia’s invasion of Ukraine.

Global natural gas markets are entering a new phase of maturity and flexibility, with market-based pricing mechanisms now dominating an unprecedented share of global consumption, according to the International Gas Union’s latest Wholesale Gas Price Survey.

The 2025 edition of the report, which marks the survey’s 20th anniversary and analyses pricing data covering 96% of global gas consumption, paints a picture of an industry transformed since the first survey was published in 2005.

Over that period, natural gas has steadily shifted away from regulated tariffs and oil-linked contracts towards competitive wholesale markets where prices are determined directly by supply and demand.

The most striking statistic is the continued rise of so-called gas-on-gas competition (GOG), where prices are established through direct interaction between buyers and sellers in wholesale markets. According to the survey, GOG pricing accounted for 49.1% of global gas consumption in 2024, compared with just 31.5% two decades earlier. Over the same period, oil-price-escalation contracts, once the dominant pricing mechanism in many international gas markets, saw their share fall from 24% to 18.5%.

The report argues that this trend reflects the growing sophistication and liquidity of global gas markets, particularly as LNG trade expands and regional markets become increasingly interconnected.

“This year’s report provides unparalleled comparisons and insights into natural gas market changes and fluctuations,” the IGU said in launching the survey, adding that global gas market functioning and liquidity remain “pivotal to energy security and to the operation of the global energy system”.

The findings also reveal how dramatically markets have normalised following the extraordinary volatility of recent years.

Average global wholesale gas prices fell to $4.88/MMBtu in 2024, according to the survey, less than half the level recorded during the peak of the 2022 energy crisis, when prices surged to $9.45/MMBtu following Russia’s invasion of Ukraine and the disruption of European gas supplies.

Despite ongoing geopolitical tensions, prices have returned to levels broadly comparable with those seen during the late 2010s.

Emergent LNG

For Europe, the report highlights perhaps the most dramatic transformation of any major gas-consuming region.

The continent has spent the past two decades dismantling oil-indexed pricing structures and replacing them with hub-based trading. In 2005, oil-linked contracts accounted for roughly 78% of European gas pricing, while gas-on-gas competition represented just 15%. By 2024, that position had effectively reversed, with market-based pricing accounting for 82% of gas traded across Europe and oil-linked mechanisms reduced to around 18%.

The shift accelerated following the Ukraine crisis, which forced European buyers to source alternative supplies and significantly expanded the role of LNG imports.

Indeed, LNG emerges as one of the report’s most important themes.

Historically, LNG contracts were predominantly linked to oil prices through long-term agreements. Today, the survey finds that more than half of global LNG volumes are traded under gas-on-gas pricing mechanisms, almost double the proportion seen in 2016. The development reflects increasing liquidity across LNG markets, the growth of spot trading and greater availability of benchmark pricing hubs across Europe, Asia and North America.

For buyers, the evolution offers both opportunities and risks.

Market-based pricing generally provides greater transparency and flexibility than traditional oil-indexed contracts. However, it also exposes consumers to short-term volatility, as demonstrated by the dramatic swings witnessed during 2021 and 2022. The report suggests that liquidity and diversification have ultimately strengthened market resilience, allowing gas to continue flowing even during periods of extreme disruption.

For the UK, the findings reinforce a reality that has become increasingly apparent since the energy crisis: natural gas is no longer primarily a regional commodity.

Instead, Britain’s gas prices are increasingly shaped by developments in global LNG markets, competition for cargoes between Europe and Asia, geopolitical tensions affecting supply chains and trading activity at international hubs. The growing dominance of gas-on-gas pricing means UK consumers and businesses are more exposed to global market fundamentals than ever before.

Flexibility and resilience

The broader significance of the survey extends beyond pricing mechanics.

It suggests that natural gas has completed a transformation that began more than two decades ago. What was once largely governed by bilateral contracts and oil-linked formulas is increasingly behaving like a globally traded commodity market. That evolution has improved flexibility and resilience, but it has also embedded gas more deeply within the dynamics of international finance, geopolitics and global energy security.

For policymakers, producers and consumers alike, the message is clear: the future of gas will be shaped less by legacy contract structures and more by the forces of competition, liquidity and global trade.

According to a separate IGU analysis released earlier this year, electricity consumption from data centres could double to between 800 and 1,000 terawatt-hours by 2030 as AI deployment accelerates worldwide. While renewable generation is expected to supply a significant share of that demand, the report argues that intermittent generation alone will be insufficient to guarantee around-the-clock reliability.

As a result, natural gas-fired generation is expected to provide much of the flexible capacity required to support the AI economy.