News Analysis

Deck: 
Fuel costs drive electric prices, but generators seem perfectly willing to pay a premium for fuel when they're getting top dollar for power.
Fortnightly Magazine - March 1 2001
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News Analysis

 



 

Fuel costs drive electric prices, but generators seem perfectly willing to pay a premium for fuel when they're getting top dollar for power.

Even as the California power crisis drew headlines in mid-winter, natural gas shot up just as much in relative terms, if not more, and the higher prices were more widespread, blanketing the country not so much with spikes as with a sustained plateau, though some signs of weakening were seen in late January and early February.

Gas prices in Southern California reached the $60 range in December, sending insiders scurrying for answers, just as when electricity prices soared in the summer and then again in the fall. But the gas question appeared more complex: Power prices responded in part to higher fuel costs, but what was driving gas prices? Was each commodity reciprocating to the other?

The facts were known to some degree:

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