Cushion Gas

Cushion gas is a financial strategy used in commodity markets to maintain a buffer of gas in underground storage facilities. This cushion gas serves as a reserve to ensure the operational integrity of the storage system and support market liquidity.

Example #1

For example, a natural gas company utilizes cushion gas in its storage facilities to have a secure amount of gas available for operational needs and to facilitate smooth market trading.

Example #2

Another example is a regulatory requirement for storage operators to keep a certain percentage of cushion gas to safeguard against disruptions or emergencies.

Misuse

One potential misuse of cushion gas could occur if a storage operator intentionally manipulates the levels of cushion gas to influence market prices. This could distort market dynamics and harm fair competition, affecting consumers who rely on transparent and stable pricing of gas.

Benefits

The presence of cushion gas offers stability and security to commodity markets by ensuring that there is a backup supply available in case of unexpected demand spikes or supply disruptions. This enhances market resilience and helps maintain a reliable flow of gas to consumers.

Conclusion

Cushion gas plays a critical role in safeguarding the functionality and reliability of commodity markets while also protecting consumer interests. Ensuring that cushion gas is utilized ethically and transparently is essential for maintaining market integrity and fairness.