Commentary Number 1

Emil Ursin

Turkmenistan has agreed to start the building of the Nabucco pipeline in 2014, supplying European countries with even more gas. This happens almost simultaneously as the Russians have finished their plans for their new pipeline into Europe, the South Stream, which is seen as a major rival to Nabucco.

Turkmenistan is planning to pump another 31bn cubic metres of gas into Europe every year, taking up the competition with the Russians who Europe are dependent on for gas.

If European countries could rely less on gas from Russia, Russia would still be a big part of the market but their ability to control the price and flow of gas would decrease. In previous years Russia has unexpectedly turned of the gas flow into Europe. These gas flow shortages have been caused by international disputes between Russia and other countries in Eastern Europe. Countries in the eastern region will have a more reliable and dependent source in the Nabucco pipeline, so they can depend less on the Russians. Hence forth bringing another company/competitor onto the market making the price elasticity of supply more elastic.

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The Price elasticity of supply would go from inelastic to elastic.

      Price elasticity of supply (PES) is the responsiveness of quantity supplied to the changes in the price given. When one firm controls the whole production of an item, the item or goods are inelastic. PES is controlled by time and availability.

As of now Russia is in control of the market. They have the “Market power”. Russia currently has monopoly on this market and can control everything from prices to quantity. Once Turkmenistan enters the market Russia will no longer ...

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