Why gas is not global
Oil goes in a tanker and sails anywhere; a barrel is a barrel. Gas is a diffuse, low-density substance that either needs a pipeline or must be chilled to -162°C, liquefied, shipped in a purpose-built vessel and regasified at a dedicated terminal.
That infrastructure dependency fragments the market into regional prices that can differ by a factor of five or more at the same instant. The UK trades at the National Balancing Point (NBP), continental Europe at the Dutch TTF, North America at Henry Hub. LNG has begun to link them, but slowly and expensively.
Storage and the seasonal shape
Demand is violently seasonal — heating in winter, much less in summer — while production is steady. The system bridges the gap with storage, so summer gas is normally cheaper than winter gas, and the seasonal spread is itself a traded instrument.
The UK has unusually little storage capacity by European standards, having closed the Rough facility in 2017 (partially reopened since). That leaves the country more dependent on flowing supply and more exposed to price spikes than its neighbours, a structural fact that became painfully visible in 2021–22 when TTF and NBP prices rose roughly tenfold and took a couple of dozen UK energy suppliers out of business.
Gas sets the electricity price
In most European markets, wholesale electricity is priced by the most expensive plant needed to meet demand — usually a gas turbine. So gas prices set power prices even in hours when most generation is wind or nuclear. Understanding gas is a prerequisite for understanding electricity.
How you would actually trade it
Wholesale gas trading requires credit lines, shipper status and balancing obligations. Retail exposure is via natural gas ETCs (heavily exposed to roll decay, historically severe in this market), CFDs, or equity in producers and utilities.
For a household, the meaningful "trade" is a fixed-rate tariff, which is a genuine hedge: you are buying price certainty from a supplier who hedges it in the wholesale market.
What goes wrong
- Extreme volatility. Multi-hundred-per-cent annual moves have happened repeatedly this decade.
- Roll decay in gas ETCs is among the worst of any commodity. Some long-dated gas funds have lost over 99% of their value while spot gas was broadly unchanged.
- Weather dependence makes fundamentals genuinely unforecastable beyond a fortnight.
- Political supply risk. Pipeline politics can reprice the entire European curve in a day.
This entry describes how a market works. It is not a recommendation, a price forecast, or advice about whether this belongs anywhere near your money. How entries are written.