Business intelligence firm IBISWorld released a report last week intended to give natural gas leverage in negotiations with suppliers. The report provides benchmark prices, 3-year price forecasts, supplier intelligence, RFP negotiation guidance, supply chain analysis, and a sample decision scorecard.
The report suggests buyers have low negotiating leverage. It suggests that this stems from customers’ limited ability to use substitute products for most applications (power, heating, cooking, industrial uses, fertilizers, and transportation) without incurring substantial switching costs. Furthermore, major natural gas providers can monopolize entire regions. Direct pipeline delivery can help mitigate these costs. Low-volume buyers tend to pay more per unit of gas. Finally, it recommends entering long-term, fixed-price contracts to lock in low prices and hedge against future increases.