Price convergence on the national gas markets of the Eastern European region

Abstract

Establishing institutional arrangements for regulating gas markets toward price convergence is one of the crucial integrational factors. The strategy of the firm and economic development management depends on it. The paper aims to assess the characteristics of price convergence on the natural gas markets of the Eastern European region. This region is relevant for Ukraine in a number of parameters. The assessment was made based on Eurostat data for different groups of consumers, excluding taxes, using the standard deviation detection method of price convergence for 15 countries in 2007–2020. Despite the revealed generally positive price convergence on the natural gas markets in the considered countries after 2014, obtained results showed three points that highlight the heterogeneous structure of the process. First, an even movement toward a single price is detected in groups of large households (the standard price deviation of the price decreased in 2014–2020 from 2.7 to 1.9 euro per Giga Joule or 1.5 times) and medium industrial enterprises (the standard deviation decreased from 1.0-1.7 to 0.6-1.1 or 1.5-1.8 times). Second, the prices for the largest industrial enterprises in considered countries approached the fastest (the deviation decreased from 2.0 to 0.5). Third, in the segment of small enterprises, the deviation even increased from 2.1 to 2.2 (1.05 times). This result highlights the gap in the institutional mechanisms of European integration and sources of uncertainty for the small firms’ management. AcknowledgmentThe paper was funded as a part of the “Determination of institutional conditions for the development of the exchange segment of the gas market” research project (No. 0122U002205), conducted at the State Institution Institute for Economics and Forecasting of the NAS of Ukraine.