Market Research on procurement of Fuel Gas
EXECUTIVE SUMMARY
The report provides an analysis of the size and scope of the market for gas products and their demands and supply. Additionally, the report has highlighted the various factors that affect the procurement and the current pricing of the gas product (natural gas). The results indicate that the price, existing policy frameworks and availability of substitutes have profound effects on the demand for the gas products and subsequently its procurement. The current pricing mechanism for the gas product is a multifactorial aspect of formulas and policies. The amount of gas products to be procured is dependent on number of suppliers, demand, size and scope of the market.
Market Research on procurement of Fuel Gas
Fuel gas is one of the most important commodities in the economy of any country. The use of natural gas as a source of fuel gas has increased tremendously in the last few years. The demand for fuel gas has been on the rise because of the pollution effects of the originally used sources such as coal and other fossil fuels. With such overwhelming demands, proper procurement procedures ought to be upheld so as to acquire the best out of the process. Gas is a substance that is common in our day to day life especially in our homes, schools, and industries (Price, 2013). Natural gas has a wide range of uses such as heating, cooking and the generation of electrical power. Therefore, natural gas has phenomenal impacts on both the domestic and industrial set-ups. The paper will lengthily examine the market research for natural gas with critical reference to the size and scope and the extent of competition. The report will further explore the demand and supply forces that are consequential to the procurement of fuel gas in any forward-looking organization. Additionally, the report will examine the various models and tools that can be used streamline the various aspects relating to the demand, supply and the procurement of the gas products. Finally, the paper will deeply examine the current pricing mechanisms that dictate the ideal prices for fuel gas, as well as other gaseous products in the fuel industry.
Due to the increased demand for the gas products and especially natural gas, the market survey becomes a vital component. The demand for gas fuel is attributed to its clean nature as compared to coal and oil (Energy Conference., & Energy Conference, 2001). Prospective firms and organizations that would like to engage in the sale and use of such products ought to assess the existing and future size of the market. The scope of the market entails a comprehensive evaluation of various features of the market. The most commonly used features to evaluate the scope of the market include the consumer needs, consumer behaviour, promotions, pricing policies and distribution among others. A rational procuring firm must embrace all the features related to the scope of the market in order to make soun The ition from other suppliers of the commodity. The aspect is achieved by evaluating the number of suppliers and the extent of global competition for the product. In this context, the procuring firm needs to consider the existing number of suppliers for the product in the locality in which it is operating. Additionally, the procuring firm should consider the size and the number of purchasers. Through such considerations, the firm cainvestment purposes. The marketing research is essential for the firm in that it helps in evaluating the various market segments. The segments are essential evaluating the stochastic model that helps in evaluating the production capacities of the firms (Breton & Ecole, 1991). The existence of more suppliers of the product will prompt the firm to make vital changes in the amount to obtain for its supply purposes. Many gas outlets have been opened up hence the need for a thorough evaluation of the prevailing market amount to obtain.
The scope and sizemarket. The underlying complexity has led to increased cases of merging with an aim of maximizing the sale of the product (World Bank Group, 1999). The firm’s ability to embrace and engagement in merging will consequently prompt efficiency in the procuring processes for the gas product.
Demand and Supply Factors in the Gas Product
There exist various demand and supply factors that have a significant influence on the procurement of gas products. Demand refers to the quantities that buyers can buy at a particular price and time while supply is the quality brought to the market at a particular time and price (Fezzi & Bunn, 2010). The demand for a commodity is dictated by the customer’s ability and willingness to pay. There exist various factors that determine the demand and supply of fuel gas. Notable factors include;
The market price of the natural has a big effect on the amount bought and supplied by the market since an increase in price encourages the suppliers to supply more. The potential buyers are few when the market price is very high, where many cannot afford the product (Fezzi & Bunn, 2010). However, many gas sellers will not be willing to sell their products and may decide to hoard them. The procurement firm should be able to procure more gas products when the demand is high in order to maximize their sales. Additionally, the firm should consider the number of sellers of the gas products before engaging in the real procurement process. By so doing, the firm will be able to avoid losses associated with high supplies of natural gas.
b) The prices of Gas Substitutes
The prices of various substitutes in the energy sector have profound effects on the demand and supply of fuel gases. The procurement of the gas products is hence altered by the prices of the substitutes.substitutes such as oil and coal will significantly affect the demand and supply fuel gases thereby affecting their procurement. Although the demand for natural gas is significantly increasing, its availability is limited in some regions of US. In such a scenario, the low prices and higher demand for the substitute will prompt the firm to procure less of the gas products due to the low market demand. On the other hand, the rise in prices for coal and oil products will prompt low demand for the products and consequently higher demand for the gas products. The objective firm will thus procure more of the gas product in order to meet the higher consumer demands.
- Existing Policy Framework
There exist various policies that influence the demand and supply of gas products and subsequently their procurement. Policies from the government and its agencies have significant effects on the demand and supply for the natural gas. Additionally, policies set aside by energy regulatory boards at both local and international levels are vital too. These policy frameworks affect the prices of the gas products and hence their demand and supply. A forward-looking organization will be critical evaluating the effects of these policies on the demand and supply of their gas product. With such evaluations and conclusions, the organization will be able to make a rational decision on the procedure and the amount to procure.
The Current Pricing Mechanism for the Gas Product
The pricing of energy products is dependent on a number of prevailing factors. The current pricing mechanism of natural gas is as a result of various previous formulas. The current pricing mechanism for natural gas is dependent on the former used formulas such as the Rangarajan formula, regulations of liquefied natural gas (LNG), and other related policy regulations relating to natural gas.
Factors that impact on the pricing of the product
Various factors impact on the pricing of the gas product (natural gas). The existing policy framework, economic factors and the demand and supply aspects have huge impacts on the price of natural gas. For instance, economic recession leads to decrease in demand and hence lower gas prices.
Market scope and size are instrumental in evaluating the demand for fuel gases. The policy framework, price and the availability of energy substitutes have significant effects on the demand and supply of gas products and consequently their procurement. The current pricing mechanism of the natural gas is a multifactorial phenomenon. Existing formulas, policy frameworks and the emergence of Henry Hub have largely influenced the current pricing of natural gas. The price of the gas is influenced by the prevailing economic conditions and the demand and supply factors among other factors.
References
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Breton, M., Zaccour, G., & Ecole des hautes e?tudes commerciales (Montre?al, Que?bec). (1991). Advances in operations research in the oil and gas industry: Proceedings of the workshop held at HEC–Montre?al, June 13 and 14, 1991. Paris: Editions Technip.
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Energy Conference., & Energy Conference. (2001). The future of natural gas in the world energy market. Abu Dhabi: Emirates Center for Strategic Studies and Research [u.a..
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World Bank Group. (1999). Natural gas: Private sector participation and market development. Washington, DC: Author.
Fezzi, C., & Bunn, D. (2010). Structural Analysis of Electricity Demand and Supply Interactions*. Oxford Bulletin Of Economics And Statistics, 72(6), 827-856. doi:10.1111/j.1468-0084.2010.00596.x
Price, M. (2013). Excessive Supply, Uncertain Demand. Science. doi:10.1126/science.caredit.a1300199
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