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Spokane, Washington  Est. May 19, 1883
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News >  Business

Natural gas prices surge 30 percent

Dow Jones Newswires

NEW YORK – U.S. natural gas prices are up more than 30 percent in the past three weeks alone, and the effect will go well beyond gains or losses for speculators on the New York Mercantile Exchange.

Consumers of natural gas, both large and small, will be feeling a financial pinch from the rally, even if prices moderate with the cooler weather and slack demand typically seen during the fall. The price spike will also have an indirect effect on many other products, from the food on supermarket shelves to cars to plastics.

“Essentially, if it’s not made out of wood, you’re going to see an increase in price,” said Peter Huntsman, chairman of Huntsman Chemical.

Natural-gas futures surged more than 6 percent on the New York Mercantile Exchange last Friday to a peak of $9.91 per million British thermal units, the highest price ever recorded by a summer contract. The gains are the latest leg in an explosive rally that has pushed natural-gas futures up by nearly $2 in the first 12 days of August alone. The rise has accompanied a run by crude-oil futures to above $67 a barrel.

“Energy prices – crude, power – everything is on the rise,” said Charlie Sanchez of energy consultancy Gelber & Associates in Houston. Before this summer, benchmark Nymex gas futures had never crossed the $8 barrier in the summer, much less approached $10. Summer had long been an off season until a massive buildup of gas-fired power generation turned natural gas into a fuel for air conditioning as well as heating.

This summer, scorching heat coupled with a strong economy are leading to record usage. The gas market’s rally has its roots in three weeks of record electricity demand in the United States that coincided with snags in deliveries of coal to power generators. The resulting pull on gas – a key power generation fuel, particularly when demand peaks – has all but erased the once-comfortable surplus in storage volumes over last year.

That, in turn, has heightened concerns about winter supply, pushing Nymex gas contracts above $10 for November through March.

Nearly a quarter of U.S. gas demand is for residential home heating, according to the American Gas Association, an industry group. Another 18 percent is used for power generation. Industry consumes a third. While residential consumption of natural gas is fairly low during the summer, the current surge all but guarantees higher heating costs for consumers during the upcoming winter peak and will put upward pressure on electricity prices as well.

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