Snowstorm predicted to hit northeast.....So of course the price of natural gas must rise, right?

[marmar]

Wall Street is a:






New York May Finally Get Snow as U.S. Northeast Faces Round Two
By Brian K. Sullivan


Feb. 8 (Bloomberg) -- A new storm system barreling across the country may bring as much as 12 inches (30 centimeters) of snow to New York, Washington and Baltimore starting tomorrow night, forecasters said.

With the Washington-Baltimore area still digging out from a weekend storm that left record snowfalls in some areas, the latest blast of winter “is going to be accompanied by heavy winds, which will make it feel worse, and across the Northeast that wind is going to last through the weekend,” said Tom Kines, a meteorologist with AccuWeather Inc. in State College, Pennsylvania.

The forecast pushed natural gas futures up today as demand for heating fuel rises. Crude oil rose for the first time in four days, rebounding from a seven-week low.

Kines said 6 to 12 inches of snow may fall along a corridor from Washington to Boston, and some areas may receive as much as 18 inches. The snow will be followed by cold air that will drop temperatures 10 to 15 degrees below normal and be accompanied by heavy winds, he said. .......(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601087&sid=aHx6e725jg5Y&pos=8

[Statistical]

1. Were you equally outraged when oil fell to a 7 week low on better than expected weather?

[marmar]

3. Perhaps if it functioned less like a casino, there wouldn't be such wild swings, n'est-ce pas?

nt

[Statistical]

4. Imagine there are no swings do you think it will be normally high or normally low?

Given the desire for energy companies to maximize profits.
My guess is you will pay "winter storm" prices year round.
Of course supply and demand can't have anything to do with it.

My gas bill doubled last month. The rate didn't go up my consumption just doubled because of cold weather.
Multiply that by couple hundred million people and that is a lot of gas being consumed.

Gas utilities generally sign multi-year agreements so their supply is protected. As such the amount of float is reduced by much more and prices move higher.

[ThomWV]

2. Just so you understand, its the spot market price that goes up

The power companys meet their needs with contracted gas. The spot market meets surge demands and primarily from smaller users..

[OneTenthofOnePercent]

5. Raising prices can actually benefit the areas affected.

When you have a disaster-like event (earthquake, large blizzard, flood, ...) which disrupts the standard supply & access system in the affected area, the ONLY way to get those needed supplies and services into the region is incentive. For example, if you are a gas supply company it becomes very difficult to supply a region under 24+ inches of snow or water. The cost or risk of delivery FAR exceeds the average market price (keep in mind the average price includes regions unaffected by the disaster). If typical prices do not justify the cost of delivery the only response is to supply your product to a disaster-free area. So how do you get electricians, clean-up labor, fuel, & water to these areas? Well, The market price in the region raises and the high cost brings in exterior resources.

Benefit #1 = Price surge encourages suppliers to actually continue supply in the region.

There is a second benefit as well that deals with social engineering and supply rationing. In a situation where a run on supplies might occur you want to make sure the product goes where it is needed the most. The concept is that where supplies are truly needed the price will be paid. For example, you may be unwilling to pay $10/gal to hoard extra fuel whereas a hospital (or emergency shelter/businesses/grocery stores/public services/etc...) has the bankroll and credit to pay for what is needed to keep running. Another example: post disaster, if all electricians only charged normal rates they would be stuck random jobs while larger entities that need fixed NOW (electric grid, hospitals, shelters, businesses) would have to wait. With price surging, resources go where they are needed first and things that can wait don't impede the progress of fixing social order.

Benefit #2 = Price surge naturally prioritizes supplies and labor required to remedy a large disaster.