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Why are natural gas prices rising?

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  • Why are natural gas prices rising?

    We like to blame the "Evil Empire" or some other untoward entity for the current run-up in natural gas prices at every opportunity. So what's the real culprit?

    Here is the DOE's short term energy outlook for this week (5/6/08). There are a number of reasons, but I think I'll chalk this one up to ethanol subsidies... Rising food prices... and unnutural weather patterns.

    Natural Gas Consumption. Total natural gas consumption is expected to increase by 1.0 percent in 2008 and by 0.8 percent in 2009 (U.S. Total Natural Gas Consumption). The assumption of normal weather is expected to lead to limited growth in residential and commercial demand in 2008, while economic conditions are expected to limit industrial sector growth for the year. In 2009, consumption is projected to decrease slightly in the residential and commercial sectors, with a small increase expected in the industrial sector. Finally, milder summer temperatures are expected to leave natural gas consumption for electricity generation unchanged in 2008, after an increase of more than 10 percent in 2007. Consumption growth of 2.9 percent is expected in the electric power sector in 2009.
    Production and Imports. Total U.S. marketed natural gas production is expected to increase by 2.9 percent in 2008 and by 0.2 percent in 2009. In 2008, the development of deepwater supplies is expected to drive production growth of 4.8 percent in the Gulf of Mexico. Production from the Lower-48 onshore region is expected to continue the upward trend of recent years, increasing by 2.7 percent, led by growth in unconventional production basins. In 2009, production growth will be offset partially by the absence of further increases in rigs drilling natural gas prospects; the natural decline in production from current wells, particularly in the offshore fields; and rising production costs. In 2009, natural gas production in the Gulf of Mexico is projected to decline by 0.7 percent while production in the Lower-48 onshore region is expected to increase by 0.3 percent.
    Imports of liquefied natural gas (LNG) are projected to reach about 680 billion cubic feet (Bcf) for 2008, representing a 12-percent decline from the record volume received in 2007. Strong demand in Asia and Western Europe, which compete with the United States for LNG supplies, has greatly reduced the number of U.S.-bound LNG cargoes so far this year. Although current import volumes are low, EIA expects U.S. LNG imports to rebound slightly this summer as global demand wanes. An increase in global LNG supplies, particularly expansions in Nigeria and Norway, are expected to boost shipments of LNG to the United States in 2009, when import volumes are projected to total about 950 Bcf.
    Inventories. On March 28, 2008, working natural gas in storage was 1,248 Bcf (U.S. Working Natural Gas in Storage). Current inventories are now 6 Bcf above the 5-year average (2003-2007) and 304 Bcf below the level during the corresponding week last year.
    Prices. The Henry Hub spot price averaged $9.74 Mcf in March, nearly $1.00 per Mcf more than the average spot price in February. This was the first month since December 2005 that Henry Hub spot prices averaged more than $9 per Mcf. The recent upward price shift reflects a number of factors, including the dropoff in LNG imports compared to year-ago levels, high oil prices, and the drawdown in storage to the lowest levels in 4 years. As seasonal demand wanes, spot prices are expected to decline before they begin to rise again toward a winter peak. On an annual basis, the Henry Hub spot price is expected to average about $8.59 per Mcf in 2008 and $8.32 per Mcf in 2009.

    There you have it Camryman. I would have posted it in the "Get together" forum, where you posted the question... but it was off topic.
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  • #2
    Re: Why are natural gas prices rising?

    Curtis, Excellent reply... You should have been a Wall street economist. But the fact remains.... The Natural gas commodity price has only risen about 10% and Oil has increased well over 30% in price. The increase at the pump for CNG has risen at almost the same pace as gasoline keeping the CNG price at 40% below to now only 30% below the price of gasoline. CNG is becoming more expensive for no apparent reason.

    Riverside sells CNG gas at cost and has raised their price at the pump 40 cents from $1.50 to $1.90 CE has stations that are priced at $2.85. In my opinion CE is over priced by 50 cents or more....and when the Natural gas commodity price goes back down. I don't expect CE will lower the price as quickly as it was raised on all of us.

    Comment


    • #3
      Re: Why are natural gas prices rising?

      The spot market price yesterday was over $11 per mcf, typically at $7.50 per mcf before prices began to climb. This accounts for home heating costs rising, but CE is pacing gasoline, as opposed to commodity prices. Regardless of cost, CE thinks $.50-$.80 below gasoline is justifiable pricing. They change prices at the pump multiple times over the month just to keep pace. Unconscionable. Others have began letter writing campaigns to their representatives and press to draw attention to the situation. Price gouging is price gouging... am I wrong?
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      • #4
        Re: Why are natural gas prices rising?

        What are we going to do when gas hits $4 a GGE? HMMMM.

        Comment


        • #5
          Re: Why are natural gas prices rising? Worldwide Demand?

          I should have phttp://www.nytimes.com/2008/05/29/bu...yt&oref=sloginut this link here. Sorry:

          Comment


          • #6
            Re: Why are natural gas prices rising?

            Curtis, you explanition was very nice, but my question now turns to other questions that have been pointed out. Price Gouging, who is and will control that. If no one then NG willl be $4 gge, in a short period of time. Why? Just because they think that they can. Money tends to make people do funny things. Even in our beloved NG community. So the real prediction is?
            My bet, it will rise at what rate? Greed will determine, unless it is seriously controlled. But then again welcome to America, land of the oppertunist, where everyone has a right to free enterprise.

            Comment


            • #7
              Re: Why are natural gas prices rising?

              Originally posted by smggt View Post
              Even in our beloved NG community.
              EXACTLY!

              The fact is, people know of the Utah State Tax Credit, the Federal Income Tax Credit, the CA Rebate, etc.

              Because of this, they just 'jack' the prices up.

              Not counting the fact that cars are going for more than they should.

              But to counter that point, I am happy when I see Honda Dealerships stick with MSRP among all these credits/rebates.

              Comment


              • #8
                Re: Why are natural gas prices rising?

                Originally posted by Curtis View Post
                The spot market price yesterday was over $11 per mcf, typically at $7.50 per mcf before prices began to climb. This accounts for home heating costs rising, but CE is pacing gasoline, as opposed to commodity prices. Regardless of cost, CE thinks $.50-$.80 below gasoline is justifiable pricing. They change prices at the pump multiple times over the month just to keep pace. Unconscionable. Others have began letter writing campaigns to their representatives and press to draw attention to the situation. Price gouging is price gouging... am I wrong?
                I remember the spot price for natural gas hitting $14-$15 /MMBtu a couple of years ago (might have been right after Katrina) and yet at that time, the public CNG stations in Southern Ca were charging less than $2/GGE if my memory serves me correctly. Interesting how now that gasoline costs more and is not predicted to get cheaper again (like after Katrina), CNG price at public stations seems to remain higher. Back then Riverside was at $1.43, now it's at about $1.90 while most other station are now more than $2.50. Somehow, though natural gas price and gasoline price are not supposed to be linked, they are currently behaving as though they are.

                Adrian
                Adrian

                Navy 2008 Civic GX (wife's)
                Silver 2012 Toyota Prius
                Grey 2012 Civic Natural Gas (mine)

                Comment


                • #9
                  Re: Why are natural gas prices rising?

                  Originally posted by cnielsen View Post
                  EXACTLY!

                  The fact is, people know of the Utah State Tax Credit, the Federal Income Tax Credit, the CA Rebate, etc.

                  Because of this, they just 'jack' the prices up.

                  Not counting the fact that cars are going for more than they should.

                  But to counter that point, I am happy when I see Honda Dealerships stick with MSRP among all these credits/rebates.
                  The fact is that the world is set up on a supply and demand basis. No one complains when GM sells their trucks for $10,000 off MSRP because the market is soft, and everyone that walks into a car dealership wants to pay invoice for a car. So why does everyone get excited when a limited commodity, that's in high demand, sells at a premium?

                  I understand both sides of the arguement, but dealers are realizing the leverage they have, just as SUV buyers do. Were this not the case, oil would remain cheap... to the last drop.
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                  • #10
                    Re: Why are natural gas prices rising?

                    Originally posted by smggt View Post
                    Curtis, you explanition was very nice, but my question now turns to other questions that have been pointed out. Price Gouging, who is and will control that. If no one then NG willl be $4 gge, in a short period of time. Why? Just because they think that they can. Money tends to make people do funny things. Even in our beloved NG community. So the real prediction is?
                    My bet, it will rise at what rate? Greed will determine, unless it is seriously controlled. But then again welcome to America, land of the oppertunist, where everyone has a right to free enterprise.
                    You're right, but this situation is beginning to find the light of day. Before long, this issue will will be addressed in ways that will likely get results.

                    This community has developed a voice that is being heard. As it grows, that voice will become louder, and clearer.
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                    • #11
                      Re: Why are natural gas prices rising?

                      I certainly hope that this issue of rising prices across america, will find a way to correct and control the NG market. What with CE and other companies out there thriving off of the oppertunity of sucking everyone dry, or else we will all be scratching our heads wondering how we put ourselfs in the same quandry as we are with oil. (saying what the hell is happening). Oh I hope not. This market unlike the oil market does need to be controlled, or else.

                      Comment


                      • #12
                        Re: Why are natural gas prices rising?

                        I see this as an opportunity. If the big boys wanna put on the thumbscrews for NG, we should start cooperative CNG stations (42 vehicles will support a station based on FMQ8-36 and a three-base system).

                        If the gas utilities get too uppity we build outhouse gas pressers for our septic tanks, then scale up to neighborhood and city sewer system levels (the technology is already available, in service and EPA-approved) lotta septic tank cleaning services would love to not have to pay for leach field privileges and my mayor and city council would love the revenue and diminished cleansing expense from someone pre-treating their waste stream.

                        Isn't petroleum cost one of the big reasons for the latest flurry of interest in NG as transport fuel? I know I have been thinking about it since roughly 2000, but I doubt that puts me among the majority. The beauty of nat gas is that it is such a pervasively available fuel source that any of us could come up with some sort of local solution. Corn for ethanol?PHHHHHHTHTHTHTHTH. We could make a whole lot more CH4 per bushel. Algae for biodiesel? I believe that the waste stream from that process could be used to make it. If not there, at least from whatever pond scum we can find--it ain't called swamp gas for nuthin!

                        I believe that the runoff that promotes the dead zone in the Gulf of Mexico (which will be growing mightily, thanks to the extra fertilizer runoff from the additional corn fields--I'll post that reference in an edit of this reply) will actually produce MORE algae for those of us who are thinking straight.

                        Comment


                        • #13
                          Re: Why are natural gas prices rising?

                          Originally posted by Adrian View Post
                          I remember the spot price for natural gas hitting $14-$15 /MMBtu a couple of years ago (might have been right after Katrina) and yet at that time, the public CNG stations in Southern Ca were charging less than $2/GGE if my memory serves me correctly. Interesting how now that gasoline costs more and is not predicted to get cheaper again (like after Katrina), CNG price at public stations seems to remain higher. Back then Riverside was at $1.43, now it's at about $1.90 while most other station are now more than $2.50. Somehow, though natural gas price and gasoline price are not supposed to be linked, they are currently behaving as though they are.

                          Adrian
                          Not so in my neck of the woods. Wisconsin has higher than normal gasoline prices (not to the extent of CA, but close) while CNG has stayed around 1.60 to 1.87/GGE
                          Jerry

                          2007 Honda Civic GX NGV Owner
                          Saving $250/mo in fuel costs vs.
                          current gasoline prices :)^:)

                          Comment


                          • #14
                            Re: Why are natural gas prices rising?

                            Originally posted by jballbt View Post
                            Not so in my neck of the woods. Wisconsin has higher than normal gasoline prices (not to the extent of CA, but close) while CNG has stayed around 1.60 to 1.87/GGE
                            Nice CNG prices! I'm jealous!

                            Adrian
                            Adrian

                            Navy 2008 Civic GX (wife's)
                            Silver 2012 Toyota Prius
                            Grey 2012 Civic Natural Gas (mine)

                            Comment


                            • #15
                              Re: Why are natural gas prices rising?

                              here in san diego its 2.80...and in moreno valley its 2.99

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