The Economics of Natural Gas

ABSTRACT Natural gas has long been a vital energy source, but in recent years, it has increasingly gained significance as a financial asset. The growing use of financial derivatives, the trading mechanisms developed in regulated markets, the inclusion of natural gas in well-diversified portfolios, and events such as the Russia-Ukraine war have been key drivers of this trend. The aim of this paper is to systematically review the economic and financial aspects of natural gas. By analyzing 126 papers published between 1997 and 2024, we examine the supply-demand balance of natural gas, the significance of the forward curve and its relationship with spot and future prices, hedging mechanisms, interconnections with oil and other asset classes, potential diversification benefits, and the most important regulatory aspects. Additionally, we propose several questions to guide future research in this field.