It is interesting when I read a report on ASEAN energy market spelling out the essence of opening access of gas pipeline or electricity transmission facilities. The access was said as a requirement for competitive market and efficient trade.
When we speak about competition, then it is always assumed that at least two players in economic activities exist to either buy or sell good(s). In buying a particular good, a buyer must convince the seller that it offers attractive profit to the seller while at the same time it ensures that the goods offered have better economic value compared with other similar alternatives.
In terms of energy, the buyer can have different options, but through rational economic calculation, the buyer chooses a seller matches with the offered good it needs, as well as the transaction cost it takes. Furthermore, the whole economic cost, direct and indirect, should meet the buyer expectation.
From a buyer perspective, the access to gas pipeline or electricity transmission will benefit the buyer since the buyer has more options to select, therefore meeting the allocation efficiency.
Speaking about seller, the seller could tap new opportunities to sell the goods they offer. With better technology and efficient transaction cost, the seller could offer a better choice to the buyer(s), therefore could tap more profit. In terms of gas or electricity trade, the seller could also offer better contractual terms and facilitate better deliveries.
Therefore, with the opening access to gas pipeline and electricity transmission facilities, it seems that this would create benefits for both buyers and sellers.
To achieve such condition, both buyers and sellers should be bound on free economic activities, with the most efficient providers gaining the maximum result of the trade. This requires deregulations and to some extends deliberalization of economic trading.
Yet, when speaking about energy needs, it should also be pointed out that the needs from domestic demand may constrain the buyer and seller trade activities. From the seller perspective, the social demand to provide gas or electricity to the local may restrict the amount of volume to be sold. By the same token, the restriction could also limit the supply of energy to the buyer.
Social demand could also increase by the progress in economy. Country selling gas or transmitting electricity could be constraint with the local demand in some years to come. The volume of unit used to be allocated for export could be no longer offered since some shares must be leaved for domestic demand, even with the price that would not be attractive enough for the seller perspective.
Another possibility comes from new competitors. With new LNG plant and terminal somewhere else closed to the buyer proximity, the transaction cost could be reduced. This would reduce the bargaining position of the existing seller, while gives benefit to the buyer. Consequently, a lower price is proposed from the buyer for the new contract which might be impossible for the seller to fulfill.
Summarizing the short article, the energy needs will eventually increase with the increase of the economy. The trade of energy through export which used to benefit the seller, may no longer appear with the demand to meet local needs. Energy sellers must look for new ways to survive with better technology, efficient delivery and tap new demand either from somewhere else or through domestic needs. On the other hand, buyer must look for new sellers with the most efficient way to trade so that it could also meet the supply for fulfilling their energy needs.
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