Gazprom Case Study

1817 Words 8 Pages
1. Introduction
Gazprom is a Russian energy company that is operating worldwide and is a natural gas provider for Russia and for more than 30 other countries. Gazprom was founded in 1989 by restructuring the USSR Gas Industry Ministry (Gazprom, n.d./2015). In the following years, Gazprom became a global company for gas supplies. The company’s share in the global gas reserves is about 17 per cent and the share in the Russian gas reserves makes up 72 per cent (Gazprom, n.d./2015). The company has almost the same per cents for the gas output. Gazprom is now doing large-scale projects, which are about the use of the gas resources of the Yamal Peninsula, Arctic Shelf, Eastern Siberia and the Far East. These are some of the gas regions of Russia.
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The European Commission has sent a Statement of Objections to Gazprom for this abuse of dominance. From April 2015, Gazprom has 12 weeks to respond to the Statement of Objections. The company can also present its own arguments and the European Commission will take this into consideration before making a final decision. Margrethe Verstager, EU Commissioner, said: “Gas is an essential commodity in our daily life: it heats our homes, we use it for cooking and to produce electricity. Maintaining fair competition in European gas markets is therefore of utmost importance.” All companies that are operating in the European gas market, have to follow the EU …show more content…
This would be at a quantity of Qc and a price of Pc in figure 1. Consumer surplus is then the part below the demand curve, above the price and until the quantity Qc. The producer surplus is the part above the marginal cost curve, below the price and until the quantity Qc. A monopoly, like Gazprom, would operate where the marginal revenue equals the marginal cost. This would be at a quantity of Qm and a price of Pm in figure 1. As a result, consumer surplus becomes smaller and is now only the coloured pink part in the figure. The producer surplus, the monopoly, gains a part of the lost consumer surplus, which now becomes the coloured blue part. The monopoly also loses a part due to the fact that it is selling less than the competitive output of Qc. So, the yellow part is called the deadweight loss, it is the loss in total welfare. The monopoly welfare is lower than the competitive welfare, because a monopolistic market is not operating in an optimal

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