The end of long-term contracts? Gas price and market dynamics in Central and Eastern Europe

This paper analyses the development of natural gas prices in Central and Eastern Europe (CEE) and assesses its drivers. Furthermore, the relation to recent changes in import contracts is discussed. The methodological approach consists of a panel analysis, in which wholesale gas prices in CEE countries are explained by a set of exogenous drivers, and a descriptive part on changes in contracts. The results provide evidence that a decreased share of oil-indexed long-term contracts has significantly reduced gas prices in Central Europe. Accordingly, the evaluation of contracting trends suggests that importing companies in CEE countries tend to replace expiring long-term gas import contracts with short-term agreements.