Natural gas is set to play a more important role in the international energy market while oil's role will become less important, according to an International Monetary Fund (IMF) paper.
Titled "The world market for natural gas: Macroeconomic and financial implications," the paper is part of an IMF series on policy analysis and assessment.Written by Thomas P. Enger, it predicts that, "the gas industry will become more internationally integrated as it undergoes development and growth and will thereby exert major influence on world trade and finance - equal, possibly, to that of the world oil market."
Unlike the oil market, however, developments in natural gas are likely to exert influence, not through short-term price shocks, but rather "on the level and geographic pattern of international trade, investment and financial flows."
As a result of intensive exploration over the past decade, proven world reserves of natural gas are now at a level close to those of crude oil.
Further, according to Enger, "the average growth rate of proven gas reserves in recent years has been more than double that of oil reserves, " and this trend is likely to continue.
Gas reserves are far more widely dispersed than oil reserves, which the author notes, will have "major implications for the evolution of international trade in the two markets."
About 65 per cent of the world's oil reserves are in the Middle East, but only about 30 per cent of gas reserves are. The Russian Federation holds the largest concentration of global gas reserves - 39 per cent.
North America accounts for about 5 per cent, and the remaining amounts are scattered around the globe.
The world's increasing energy requirements and the risks, costs, and availability of other forms of energy may combine to promote natural gas from a bit player to principal actor on the world energy scene, Enger wrote.