Global Markets & Heating Costs
How the Global Market for Natural Gas Affects Your Heat Bill
There is currently a lot of worry about the pricing of natural gas, and why prices are higher than some analysts expected. How does this affect you?
The Commercial Rates – Current and Historical
Current commercial rates are over $9.00 per giga-joule, which is pricey when compared to a year ago. There was a time, not too long ago, when prices were as low as $3/GJ. Some consumers took advantage of this, and locked in at that rate in their commercial plans. For them, this is a fantastic boon, savings tens of thousands of dollars. Consider that a large consumer uses over 5000 GJ per year, and at the current rates, those locked in at even $5/GJ will save $20,000 per year on these costs alone. Yet, a lot of commercial consumers looked at the prices when they were $5 or $6, even $7 and $8, and thought that they would fluctuate back down. Well, it isn’t going to happen.
Seasonal Variation
Historically prices fluctuate quite a bit from winter to summer. This is due to a number of factors, including demand being lower for heating in winter months, but also because production tends to remain steady throughout the year, and stockpiles accumulate over the summer, and are cut into in high demand seasons. This is why the lowest prices tend to be toward the end of summer, when stock is at its peak, even though demand may have started to increase in late August and September. It’s the old adage of supply and demand.
Future Commercial Rates
According to some analysts, prices will continue to climb in the next year, with increases happening almost daily. This will be a steady incline, until prices stabilise at or slightly above the $11.00 per GJ mark. This is a very high price that is expected to remain relatively even throughout the year. This doesn’t seem consistent with what has happened historically. Why would that be? We are now, for the first time in history, operating on a truly global market. This means that local, seasonal variations in gas pricing will be very small.
What it Means for the Small Consumer
For the average home consumer this is all too much. People just want to know what they’re going to pay for gas each month. Well, those people who locked into plans when they could will be happy. They now have the best rates they will ever see.
For those who haven’t, you should call your provider and see if it’s possible. Of course not all states and provinces have free market natural gas. If this is the case, then you’ll just have to pay the government rate. For those who do, lock in now! There are some hedge plans available, even for the small consumer. Don’t bother. They’re not worth your time, and they’re often too confusing for the average consumer anyhow.
