Demand for natural gas is expected to rise in line with improved economic conditions
Los Angeles, CA (PRWEB) August 30, 2014
The natural gas market has a buyer power score of 2.1 out of 5. According to IBISWorld procurement analyst Keiko Cadby, “highly volatile pricing trends, due to input cost fluctuations and growth in demand, and low availability of substitutes have significantly reduced buyer negotiation power.” Moreover, natural gas is essential to a number of purposes, including cooking, industrial, heating, power generation, as fuel for transportation and in the manufacturing of fertilizers. To this end, suppliers are not required to exhibit flexibility in prices as increasing demand keeps prices high. For these reasons, and to help procurement professionals make better buying decisions faster, business intelligence firm IBISWorld has updated a report on the procurement of Natural Gas in its growing collection of procurement category market research reports.
Although overall market concentration is low, major players in the natural gas market often monopolize entire regions. As a consequence, buyer power is hindered by the limited supplier options. However, buyers may benefit from the cost-savings of direct pipeline delivery. Large players may also be vertically integrated and can forego the wholesaler middleman by processing and delivering their natural gas products via pipeline to their large-volume customers. Preexisting pipeline or terminal infrastructure are important for the buyer to consider, as any necessary construction will increase the buying lead time and costs associated with receiving natural gas supply. “As a result, buyers that do not need large volumes of natural gas and do not have expensive pipeline delivery systems end up paying more per thousand cubic feet than their larger counterparts,” says Cadby.
High volatility in pricing negatively affects buyers because fluctuations may subject them to sudden price increases. To hedge against risk, buyers should enter into contractual agreements now to lock in current rates. To further protect themselves, buyers should also consider integrating terms in the contract that place some restrictions on when the supplier can increase the price, such as when production costs rise. Alternatively, the average profit margin in the market is high, and buyers can potentially negotiate better pricing. As a result, buyers may gain some relief from the otherwise difficult negotiating conditions.
For more information, visit IBISWorld’s Natural Gas procurement category market research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of natural gas. Natural gas is a type of fossil fuel and is a nonrenewable resource. It can come in liquefied (LNG) or compressed (CNG) forms. Suppliers provide natural gas to buyers for use in heating, cooking, power generation, as fuel for transportation and in the manufacturing of fertilizers. This report excludes other types of energy sources, such as oil, coal, nuclear and solar energy and does not include gasoline.
Recent Price Trend
Product Life Cycle
Total Cost of Ownership
Supply Chain & Vendors
Supply Chain Dynamics
Supply Chain Risk
Market Share Concentration
Buying Lead Time
Key RFP Elements
Buyer Power Factors
About IBISWorld Inc.
IBISWorld is one of the world's leading publishers of business intelligence, specializing in Industry research and Procurement research. Since 1971, IBISWorld has provided thoroughly researched, accurate and current business information. With an extensive online portfolio, valued for its depth and scope, IBISWorld’s procurement research reports equip clients with the insight necessary to make better purchasing decisions, faster. Headquartered in Los Angeles, IBISWorld Procurement serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.