WHY HAVE NATURAL GAS PRICES BEEN SO VOLATILE IN RECENT YEARS?
The wholesale price of natural gas was relatively stable during the 1990s – around $2 per thousand cubic feet (Mcf) – because natural gas supplies were ample to meet demand. Since 2000, however, wholesale, or “wellhead”1 natural gas prices have risen, averaging $7.33 in 2005 and settling back down to around $6.40 per MMBtu in 2006 and 2007, according to the Department of Energy’s Energy Information Administration (EIA). Factors that can result in higher natural gas prices include increased use of natural gas to generate electricity, especially during the summer months, disruptions to natural gas production caused by unusual weather or hurricanes and public policies that have made it increasingly difficult for energy producers to keep up with consumer demand. The U.S. will be vulnerable to sudden energy price spikes as long as supply is not allowed to keep pace with demand. Changes in demand can happen quickly and the single largest factor normally affecting demand is weather. As has be
