Global recession impacts gas prices, market
Demand for available supplies, global tensions and other factors continue to affect natural gas prices this fall.Wholesale natural gas prices on the New York Mercantile Exchange (NYMEX) fell from a July high of $13.60 per dekatherm to an October low of $6.05, close to the wholesale price for natural gas a year ago.
Natural gas market prices tend to closely parallel the trend lines of crude oil. Crude oil prices peaked at $147 per barrel in early July, resulting in $4-per-gallon pump prices across the U.S. for the first time in history. Then oil prices began to fall, and during November, the barrel price fell below $60.
Fuel costs have risen over the last five years. From October 2003 to October 2008, natural gas prices increased 40%, crude oil was up 133% and heating oil topped the inflationary spiral at 153%.
"Obviously, demand for available supplies and global tensions continue to play into the market's volatility," Jeff Keebler, MGE's senior director of Energy Supply Procurement, observed. "But there are additional factors contributing to these prices."
Among them is the increasing cost of production, due in large part to new wells that require more advanced technology and expensive infrastructure to develop.
Other factors include world demand for liquefied natural gas and depleted domestic storage as a consequence of last winter being the coldest since 1995-96.
What's the outlook for this winter given the extreme highs and lows thus far during 2008?
"Prices will remain volatile as we enter the heating demand season," reminded John Jicha, MGE's manager of Energy Trading. "Prices have fallen quickly over the last couple months. We are actively monitoring the market dynamics to see where prices go once cold weather hits."
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