Natural gas stakeholders during price growth: a case of Ukraine

Abstract

Purpose

The purpose of this paper is to establish groups of stakeholders who win and lose from changes in natural gas prices and to develop practical recommendations for a state regulator for the optimal setting natural gas prices in the domestic market through an example of Ukraine.

Design/methodology/approach

In this study, to identify groups of stakeholders with gains and losses from the pricing of natural gas, the author used traditional methods of correlation and statistical regression analysis, including the ordinary least squares (OLS) method.

Findings

The main profit from natural gas remains in the extraction sector. The remaining profit is distributed among the various stakeholders. The consumers during rapidly rising gas prices have to rely on energy efficiency and switching to alternative, less costly resources. The existing system of unified natural gas price for all industrial consumers is inefficient and leads to the losses of the largest industrial sectors in Ukraine – metallurgy and chemical industry. With the help of the developed models, the author determined the critical levels of natural gas prices for these two industries.

Research limitations/implications

The study is limited by data about activity of eight key manufacturing companies, four gas distribution companies, and main state gas companies from two country only.

Practical implications

Defined levels can be used by a state regulatory authority as a boundary, above which these industries will be unprofitable and their fate along with hundred thousands of workers will be questionable.

Originality/value

This is the first paper that set the critical levels of natural gas prices for two manufacturing industries in Ukraine.

Citation

Goncharuk, A.G. (2015), "Natural gas stakeholders during price growth: a case of Ukraine", International Journal of Energy Sector Management, Vol. 9 No. 1, pp. 94-104. https://doi.org/10.1108/IJESM-04-2014-0004