Writing on the WSJ blog The Source, James Herron notes that Gazprom gave its first major sign that it is reeling on its back heels to preserve market share as it has “cracked open some of its sacred texts” of natural gas pricing as linked to the six-month lag behind oil prices, and opened up for renegotiation of several long-term contracts with European customers. 

As usual, blame the U.S. oil shale technology for flooding the market with supply.  However, I’m not sure I agree with Herron that spot market pricing will stick around forever, but this move away from oil-indexed pricing in global markets is huge news.  Cheaper gas is obviously not a huge threat to Gazprom’s survival as a colossal global corporation, but it does do damage to its potency as a political weapon.

In the face of serious discord among its key European customers, Gazprom has offered to shift a portion of the gas it supplies to a free-floating price established on market hubs like the U.K., the Netherlands and Belgium. This is a major concession for a big, conservative, slow-moving company like Gazprom, which has consistently derided the notion that free markets should set the price of its product and even pushed to establish an OPEC-like cartel to control global gas supplies.