Gas, Power, Coal & Carbon

Three Hubs, One Molecule

Crude oil trades as one global market with regional quality spreads. Natural gas does not. Gas is expensive to move, so the world settled into three regional price systems: Henry Hub in the United States, TTF in Europe, and JKM in Northeast Asia. Each hub reflects its own supply, storage, and weather, and for most of history the three could drift apart by enormous margins because no physical mechanism connected them.

That changed in February 2016, when the first LNG cargo left Sabine Pass in Louisiana. US export terminals buy gas at Henry Hub prices, liquefy it, and sell it wherever TTF or JKM pays more. The result is a permanent three-way arbitrage: when Europe outbids Asia, cargoes swing toward Rotterdam; when Asia outbids Europe, they swing toward Tokyo and Shanghai. The three hubs are still distinct prices, but LNG tankers now stitch them together, and the spread between any two of them is itself a traded market. NatGas 101, the companion volume to this handbook, covers the North American gas market in full depth.

Units: MMBtu, MWh, and the Currency Layer

Gas and power markets force traders to be fluent in unit conversion. American gas trades in dollars per million British thermal units (USD/MMBtu). European gas and all electricity trade in megawatt-hours, with European prices quoted in euros (EUR/MWh). One MWh contains about 3.412 MMBtu, so a quick mental bridge is: divide a EUR/MWh gas price by 3.4, then convert euros to dollars, to get a rough USD/MMBtu equivalent. At parity exchange rates, 34 EUR/MWh is roughly $10/MMBtu.

The oil bridge matters too. A barrel of crude contains roughly 5.8 MMBtu of energy, so multiplying a gas price in USD/MMBtu by 5.8 gives its crude-equivalent price. That conversion is how the market grasped the scale of the 2021-2022 European energy crisis: when TTF traded above 300 EUR/MWh in August 2022, the energy in that gas cost more than $500 per barrel of oil equivalent, at a time when Brent itself traded near $100. Europe was paying five times the oil price for energy in gas form.

The Crisis That Redrew the Map

Before 2022, Russia supplied roughly 40 percent of the European Union's imported gas, most of it through pipelines. Through 2021 Gazprom quietly let its European storage positions run down; after the full-scale invasion of Ukraine in February 2022, flows were progressively cut, and in September 2022 the Nord Stream pipelines were destroyed by sabotage. TTF front-month futures, which had spent most of the 2010s between 15 and 25 EUR/MWh, settled above 339 EUR/MWh on August 26, 2022.

Europe responded by buying nearly every flexible LNG cargo on the water, mandating that storage be filled ahead of each winter, and permanently re-anchoring its gas price to the global LNG market rather than to Russian pipeline contracts. The crisis pulled JKM and TTF into tight competition for the same cargoes and confirmed Henry Hub, the cheap supply end of the arbitrage, as the marginal source of global gas. Ukrainian transit of Russian gas ended entirely on January 1, 2025, closing the book on the old system.

Power: The Real-Time Commodity, and Carbon: The Invented One

Electricity is the purest commodity market in existence because it largely cannot be stored. Supply and demand must balance every second, so prices are set for every hour, and in some markets every five minutes, at hundreds of locations on the grid. Scarcity sends prices to caps measured in thousands of dollars per MWh; surplus wind or solar at low demand sends them negative, since some generators pay to keep running rather than shut down. The economics of a power plant are read through spreads: the spark spread (power price minus the gas cost of generating it) for gas plants, the dark spread for coal plants, with the heat rate, the efficiency of converting fuel to electricity, as the conversion factor between fuel and power prices.

Carbon is the opposite case: a commodity that exists only because legislation created it. The EU Emissions Trading System, launched in 2005, caps total emissions from power, industry, aviation, and shipping, and lets a market discover the price of each tonne. Reforms such as the Market Stability Reserve turned an oversupplied scheme trading near 5 EUR/t in the mid-2010s into one trading above 100 EUR/t by February 2023, and from 2026 the Carbon Border Adjustment Mechanism begins charging that price on the embedded emissions of imports into the EU. Carbon is now a core input cost in European power, steel, and cement, and a benchmark other jurisdictions copy.

Coal's Stubborn Persistence

Coal was supposed to be the dying commodity of the 2010s. Instead global consumption set a record near 8.8 billion tonnes in 2024, because Asian demand growth outran Atlantic decline. Europe and the United States retired plants, and the Amsterdam-Rotterdam-Antwerp import market behind the API2 index withered; meanwhile China and India, which together burn roughly two thirds of the world's coal, kept building. The seaborne benchmark accordingly moved east: Newcastle 6,000 kcal/kg coal loaded in Australia, assessed by globalCOAL and traded as futures on ICE, is the price that matters. The ships that carry that coal, and every other bulk and liquid cargo, are themselves a traded market, covered in the Freight and Shipping section.