Many utilities engage in hedging to protect customers from price spikes. But unless regulators are involved in crafting and monitoring these programs, they can turn into speculative ventures that...
Gas Crisis Forum: Prices Pointing Skyward!
- likely to remain high for the rest of the year.
- Storage in consuming areas both east and west will get filled at a heady pace, and this demand will put upward pressure on prices until the heating season.
- Residential and small business demand will continue to increase unless consumers start spending money on conservation, not increasing the size of their homes, and regulators, government, and businesses start publicizing the ins and outs of conservation.
- The use of natural gas for power generation most likely will continue to increase. Imports from Canada will not increase and will not be a stopgap source of gas in the depth of winter, thus increasing the chance of price spikes.
- An increased productive capacity will increase domestic production, but it probably won't be enough to significantly reduce prices.
- Increases in LNG supplies and exports to Mexico will tend to offset one another.
- Utilities will continue to sign longer-term contracts with producers at a price that is higher than what an aggressive wholesaler would pay.
Down the road, increased natural gas will flow into the Northeast from the Maritime Provinces, and the domestic pipe/utility companies that own the LNG import facilities will make fuller use of the capacity available to them. Conservation initiatives will kick in as a response to continued high bills, especially if the economy is in recession, and additional amounts of gas will flow from the accessible area of the Rockies eastward. -J.H.H.
- One of the other uncertain factors not considered directly is the price of oil in particular residual fuel oil. The reasons for this are several. Changes have taken place in manufacturing that have apparently reduced the importance of oil. In power generation, efficient combined-cycle generators are substituting for oil or fuel switching generators, and available oil price information for estimation purposes is of poor quality. Such considerations motivate treating oil prices as just another source of uncertainty in natural gas prices.
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