Why are CNG prices rising?!

[rojak]

With the exception of the Union City CNG station, which is at the Union City Public Works yard, and has been $2.27 per gge for months, all other CNG stations in the SF Bay Area have been increasing their prices like crazy... the Pinnacle stations (e.g., Santa Clara) just recently had another increase from $2.77 to $3.15! The airport and PG&E stations appear to be increasing as well.

What gives? Everything I've read is that CNG (methane) is a domestic resource in the US... is it tied to the market speculators that appear to be driving up gasoline prices? UT prices are still < $1, but, I see they've risen in the year from ~$0.68 to ~$0.82... (there's a good description out on the UT portion of the forum as to why UT's prices are so low).

I find it hard to believe that supply and demand forces are at work. Heck, it's the summer time, so homes aren't even using the gas to heat their homes.

Anyway... it seems the consumer is getting reemed once again thru what appears to be price fixing / collusion. Lack of regulation over something that is a necessity and controlled by so few is ripe for this type of behavior. This is not a market that is able to remain in check thru natural competition.

Any insights / suggestions for action is appreciated.

[CraziFuzzy]

Re: Why are CNG prices rising?!

The short answer? because you are still buying it, and noone is offering a cheaper source. There is not enough competition in the public CNG filling market, so those that are there can charge whatever the market will buy.

No-one said the free-market was free...

[freedml]

Re: Why are CNG prices rising?!

Wholesale natural gas is up, but not as much as the prices at the pump.

I just bought ng at PGE a couple of weeks ago and it was a lot less than the price posted on cngprices.com ($2.55/gge). No price was posted on the pump, but the total cost of the gas on the bill they sent me.

crazifuzzy is right -- they take advantage of the lack of competition. some cities (San Fernando, Riverside) and PGE don't seem to do that, but CE, etc. do.

[rtry9a]

Re: Why are CNG prices rising?!

The price of nat gas is rising because the cost of oil and coal have risen- the big users (utilities) generally can pick between sources of btu's for their steam boilers/generators. Historically, the relationship between natgas and oil was abt 6:1; the natgas glut from several warm winters in a row dropped the relationship to 10:1 last year- now it appears that the prices are normalizing. Bottom line, the utilities are now using mostly natgas which has dropped reserve supplies and forced prices higher.

[CraziFuzzy]

Re: Why are CNG prices rising?!

some cities (San Fernando, Riverside) and PGE don't seem to do that, but CE, etc. do.

These cities don't because the set pricing policies in place when they made their stations public that set them at a zero profit, so they are basically running at gas cost + electricity cost + maintenance + capital amortization.

[Beej]

Re: Why are CNG prices rising?!

All energy prices are up this year. It doesn't matter if you're talking about crude, coal, or our beloved nat gas.

I've attached two charts that are current as of the market close today. The first is the spot futures contract. There has been a sharp sell off over the last week (About 15% since the beginning of the month). Despite the pull back, prices are up a whopping 50% since the beginning of the year. The second chart is an ETF (kind of like a mutual fund) that invests in the actual commodity of nat gas. You'll notice their charts are identical but the ETF doesn't expire like a futures contract so it's just a little easier to see the price action I'm talking about.

Is energy in a bubble? Absolutely. But no one can say when a bubble will burst so expect prices at the pump to continue upwards while the market price for the stuff continues upward as well.

[PaulH]

Re: Why are CNG prices rising?!

Natural gas trading prices have been down 20% since the beginning of July.

[wolfrpi]

Re: Why are CNG prices rising?!

My gut instinct tells me that someone is trying to take advantage of the situation. I think that the rationale for raising prices is that because gasoline prices have risen, so should CNG. In other words, if CNG at $2 was a viable alternative to gasoline at $3.50 for example, then if gasoline prices went up 20% to $4.20, why shouldn't CNG prices also increase by a similar amount? The reason why we bought NGVs in the first place was partly because the cost differential "penciled out." Here, because gasoline is more expensive now, more expensive CNG would still pencil out.

I really hope that these CNG guys are not trying to capitalize on the fear out there in the marketplace. If they are turning a huge profit compared with their gasoline counterparts (who are paying more from their suppliers and thus passing the cost along) that is unfortunate. I am sure someone from one of these CNG distributors will eventually come forward and explain the facts. As it is now, I can't really understand why CNG is 2.19 in Riverside, 2.78 in Corona, and 3.20 in Orange County? Something seems amiss! If the Orange County stations are really turning $1 in profit per gallon, I want a part of that business!!!

[TheBundo]

Re: Why are CNG prices rising?!

Union City's nozzle seemed real oily yesterday

[Steve]

Re: Why are CNG prices rising?!

What I understand (which can be very little) is the economy at one time favored tech stocks. Those stock prices were outrageous until the bubble popped. Then the economy was in love with everything about real estate. That bubble recently popped. The emphasis has now shifted to the energy sector as a way to make money. The outrageous prices are not here to stay either. Natural Gas is just as much a part of the energy sector as is oil. All of this stock trading is what the news refers to as speculation.

[freedml]

Re: Why are CNG prices rising?!

I can't really understand why CNG is 2.19 in Riverside, 2.78 in Corona, and 3.20 in Orange County? Something seems amiss! If the Orange County stations are really turning $1 in profit per gallon, I want a part of that business!!!

Exactly the rationale you mentioned. CE keeps the price of its CNG below gasoline by a dollar or so regardless of their cost of Natural Gas. Gasoline stations are very competitive so a station which charges a few cents more than the station across the street will lose a lot of business. CE has no such fears. We NGV drivers are so happy that the dispenser works, especially when traveling out of our 'home' area, and we don't have to drive from station to station to get fuel that the price is almost irrelevant -- we'll pay it. For regularly traveled routes we can pick our stations based on price but not otherwise. For instance, I've gone back and forth to Fresno enough now to know that Tulare is the most reliable and the lowest cost CNG along 99. But it took a few trips to figure that out (before www.cngprices.com) and it could change over time.

Yes, gross profit on CNG (per GGE gas only not counting other costs) is really high now. The 'nonprofits' sell it as low as $2.19/gge, and CE is $3.20/gge. If their costs are about the same as the 'nonprofits' then they're making an extra $1/gge profit. At home it was $1.75/gge last month just for gas and taxes (SCGas in City of LA).

What baffles me is that cities (Burbank, Santa Clarita, Pasadena) have contracts with CE that let CE overcharge the public so blatantly. You would hope that once these contracts are up for renewal (and the capital costs are paid-off) that cities would pay more attention to this.

[alliedmotors]

Re: Why are CNG prices rising?!

What I understand (which can be very little) is the economy at one time favored tech stocks. Those stock prices were outrageous until the bubble popped. Then the economy was in love with everything about real estate. That bubble recently popped. The emphasis has now shifted to the energy sector as a way to make money. The outrageous prices are not here to stay either. Natural Gas is just as much a part of the energy sector as is oil. All of this stock trading is what the news refers to as speculation.

You got it right. Precious metals and mining stocks are also way up. The question now is what is the next big thing? Energy prices aren't going down dramatically until another bubble develops in another sector.

[Beej]

Re: Why are CNG prices rising?!

Keep in mind these commodities are traded in US dollars, which is in the pooper right now (yes, that's the technical term we use in the market) so that is going to play a part in this bubble. The dollar will remain weak as long as Bernanke is forced to continue to try to bail out the housing woes of the country. The Fed's policies for the last year have been worsening the bad situation that is our dollar.

I personally think companies like CE are taking advantage and it's a dirty game they play. I hope we can keep them out of UT.

Nat Gas, the commodity, continues to fall, now off 27% from July 1. Has anyone seen a 27% drop in the price at the pump???

[mecklen]

Re: Why are CNG prices rising?!

Yes, gross profit on CNG (per GGE gas only not counting other costs) is really high now. The 'nonprofits' sell it as low as $2.19/gge, and CE is $3.20/gge.

Perhaps this is irrelevant to the discussion, but why isn't Utah an example in these discussions? Here the price of natural gas is regulated due to Questar's status as a regional monopoly/utility. The price here just went up from 0.638 to 0.849.

The utility commission is required to ensure that Questar makes a "reasonable profit" from the gas they sell. Therefore, any price above 0.849 is better than a "reasonable profit". Certainly Questar believes this is reasonable or they would request higher rate hikes. (BTW, the rate will go up to 1.08 in October.) Of course, there is the 50 cents per gge federal incentive that Questar passes along, but it seems that there is still a vast gulf between a "reasonable profit" in Utah vs. other prices in the west.

This is not a plug for regulation, BTW, rather a discussion about reasonable profit.

[ch4]

Re: Why are CNG prices rising?!

... This is not a plug for regulation, BTW, rather a discussion about reasonable profit.

Unfortunately most Crazy Capitalists feel like Gordon Gekko (GG I like that.)

"Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind."

"It's not a question of enough, pal. It's a zero sum game, somebody wins, somebody loses. Money itself isn't lost or made, it's simply transferred from one perception to another. "

It's been proven again and again, unregulated markets do not serve the greater good.