MACROECONOMIC and MICROECONOMIC ANALYSIS - Assignment Example

Demand and supply factors Gazprom operates in the industry of natural gas. From the supply side the factors affecting sales of the company and its profitability are weather, demographics, economic growth, fuel consumption, storage and exports. From the supply side the factors affecting sales are pipeline capacity, storage, gas drilling, natural phenomena, technical issues and imports. The demand of natural gas has followed the cyclical pattern. It depends on time and season changes. The peak season of demand is the coldest months while demand is low in the hotter months although demand increases slightly in summer to meet the requirements of electric generators.

The price of natural gas can affect demand of particularly those consumers who have the capacity to switch the fuel of their dependence. An expanding economy tends to give rise to more demand for the industrial consumers. (EIA, 2008). The supply and the price of electricity will affect the demand for retail consumers. Restructured electric industry is expected to keep stability in electricity price. Deregulation of market for natural gas and competition may reduce the prices in the long run. WPA report states migration of population from southern to western states.

Supply of electricity is required for the nation’s space cooling agency, energy is used for space heating, and migration may reduce the demand in these sectors. Stringent regulations on total energy efficiency can serve as the helping hand in increasing demand of natural gas in residential and commercial appliances. Technological advancement in the form of application operated with natural gas may compete with the electrical ones providing a huge increase in demand. Market Structure A straight forward market structure characterized the market for natural gas prior to deregulation and unbundling of pipeline.

(Natural gas, n.d.). The industry has changed dramatically in the present times and exposed to choice and competition. Free market regulates the prices. Interstate pipelines offers on the components of transportation which is under the regulation of the federal. LDCs are continuing to offer bundled products although many states allow the use of distribution network but only for transportation. Producers or LDCs are the supplier to the end users. Marketers are present in the existing market structure.

They serve in the process of mobilizing natural gas from producers to end users. Marketers can have their mark in sale and transport of natural gas. The simplified market structure is presented diagrammatically as follows: (Natural gas, n.d.). The regulation of the environment also has its effects on constructing the market structure. The actions taken by the federal and the related agencies can have significant impacts on the functioning of natural gas market (The Natural Gas Supply Association, 2006).

Requirements to compete in the market The market for natural gas tends to be profitable as they enjoy monopoly power. To maintain the profitable positions the company should prevent discriminatory and preferential service. Investments which are inefficient and strategies of unfair pricing should be avoided. The company should ensure service of high quality. Measures can be undertaken to prevent wasteful duplication of facilities. The company can act as a substitute where