Brief summary of recent natural gas price history

Natural gas prices are volatile. Their price pattern can generate large fortunes. The volatile pattern can also generate painful bankruptcies for those on the wrong side of the bet.

People who bet on those prices need to recognize the risk. Most people assume that power generators who are planning to meet demand in the next few years with natural gas burning power plants are betting that they understand the potential risks.

What most people do not understand is that there are power generators who are isolated from the risk of rising natural gas prices by the fact that they operate in markets where all of their competitors have the same issue, or by the fact that they operate in states where there is an almost automatic electricity price protection mechanism that adjusts for variations in fuel price. In those states, the consumers who do not have a big say in the choice of power generation facilities are the ones who are taking the fuel price risk.

Consumer groups should be supporting new nuclear power plant projects that provide reliable power without a fuel price risk to hedge against the very real risk that natural gas prices are going to skyrocket within the next 2-4 years. Unless our economy goes into a full blown depression, I am almost sure that gas that is sold to power generators will exceed $10 per million BTU for at least one month sometime between now and the end of 2015. I am also fairly certain that the price increase will not be a temporary blip.

About Rod Adams

23 Responses to “Brief summary of recent natural gas price history”

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  1. DV82XL says:

    The current glut of natural gas is having an impact on smaller companies involved in fracking as they are not able to recover costs. This is leading to a consolidation in the industry, and this to a concentration of supply in the hands of a few players. I suspect that prices will remain low regardless, until this process is complete.

    Nuclear simply cannot compete with natural gas on price alone, nor do I think that enough nuclear power can come on-line fast enough to keep gas prices from doing whatever the industry wants once the current glut passes. Unless concern over AGW due to GHG emissions is leveraged to make gas responsible for its external burden on the environment nuclear energy will not make any real gains.

    I know this is a divisive topic even among nuclear energy supporters, but it simply cannot be swept away as it is real the only tool we have to push for more new nuclear.

    Over the past little while I have put several climate change sceptics/deniers up against the wall and in all cases I have found that under some pressure the real issue has almost nothing to do with the science, (unsurprising as most are hardly capable of critiquing it in depth) or broad macroeconomic concerns and much to do with the individuals fears of their own situation.

    The root of their problem with accepting that CO2 might be a major contributor to climate change is the recognition that if CO2 emissions are placed under tighter controls they are likely to bear a huge monetary burden due to their dependence on automobiles. Many need a car to get to work from the fringe suburbs they moved to and need a car when they are at home because of poor public transit and lack of close shopping. Under any serious scheme of carbon mitigation they take it in the neck not only because of the cost of transportation climbing, but the value of their homes (often fossil-fuel heated) dropping as these become less marketable and the lifestyle they represent less attractive.

    I understand this but given that any rational schedule for the development of nuclear power to the point where it is the leading source of electrical generation in the world has to be seen as occurring over the better part of a century our perspective on AGW need not be focused on ether short-term policy or sterile debate over the quality of the existing AGW models. Yes they are flawed, this is fairly typical of the early development of any complex model of a physical system and is part of the process. In time they will be refined so that they will better reflect observations.

    Until then, as poor as they are, they are the only game in town that we can play.

    • Brian says:

      Every model is wrong, but some are useful. The question to ask is whether they are predictive enough to indicate the presence of a serious problem. We don’t need to have the exact picture nailed down to make a risk-informed decision, just one that is good enough.

      Looking back to the 1940s, Fermi and his crew were able to do quite a lot with back of the envelope calculations. They could have told you with high certainty that they could initiate a self-sustaining chain reaction, even if they didn’t have all the details correct.

      • DV82XL says:

        The question we have to be asking as pronukes is if AGW due to GHG is not yet an issue, can humanity keep acting as if the atmosphere is a bottomless sink for these gases. In other words: if it’s not a problem yet, is the hypothesis of anthropogenic climate change so flawed that it can be asserted it will not be in the future.

        If the answer is no, and if the long lead times for nuclear builds are taken into consideration, does it really matter to us if things aren’t getting as bad, as soon as some climate scientists thought they would.

        • Jason Kobos says:

          That is an interesting point you brought up. Is the AGW skeptics position one of AGHG have no impact or AGHG have a small impact. If its the latter perhaps we can get some gears turning in their head by simply asking. What level would cause problems? Then follow up by, when will this happen?

          I also have been wondering what portion of people claim to be AGW skeptic/deniers not because the science is bad but because they fear the Big Government corrective actions will negatively impact their livelyhood/lifestyle more than a changing climate will?

          At least in just reading the news stories over the past 2 years(didn’t follow this topic before that) I have noticed that most AGW deniers very quickly get on topic about how terrible the political fixes are. Often going as far to say that the science is made up solely for the purpose of taxing carbon etc. Which is rather odd IMO because the largest and most powerful companies in the world who have the most influence over politicians generally are negatively impacted by such schemes.

          Perhaps AGW is just too scary to be believed?

          • Rod Adams says:

            @Jason Kobos

            If I did not understand nuclear energy and the relationship between opposition to nuclear energy and the desire to keep selling fossil fuels, I MIGHT be a little tempted to be skeptical about climate science.

            However, I know that nuclear fission can probably replace enough fossil fuels to lower our overall consumption to the point where natural mechanisms that use CO2 can handle the remaining emissions. I also know enough about economics and the way that supply and demand set prices to recognize that the operating point of the economy would result in an amazing movement of power and wealth from the fossil fuel industry to the industries that would be either associated with nuclear energy production or associated with figuring out new ways to use all of the low cost, abundant, clean energy that nuclear fission makes available.

            This scenario scares the daylights out of Amory Lovins and his fossil fuel industry employers. Allowing civilization to have massive quantities of reliable power means we just might use it to lower our consumption rate of fossil fuel and lower the price that we pay for fossil fuel – at the pump, with taxes that protect fossil fuel supplies around the world with military might, and in the damage that we accept to our environment.

    • Brian Mays says:

      The oil companies have already beaten you to the punch. When it comes to AGW, natural gas has already been branded as the solution, whether it comes to replacing coal and oil with natural gas or using flexible natural gas plants to back up unreliable “renewable” sources of energy.

      For example, the Union of Concerned Scientists — one of the groups that has been out beating the drum on AGW pretty strongly — has this to say about natural gas in the section of its website called “Clean Energy”:

      Overall, the increased use of natural gas over coal and oil will produce real and substantial reductions in global warming emissions and improvements in public health. As gas use expands, the natural gas industry must also minimize the environmental effects of its extraction and production. If used wisely and efficiently, natural gas can help our economy effectively transition toward even cleaner, more sustainable sources of energy like wind, solar, geothermal, and bioenergy.

      To most of the public out there, increasing the West’s reliance on natural gas is not considered a problem. On the contrary, it’s now the thing to do if you are concerned about Global Warming.

      • Rod Adams says:

        @Brian – are you moving closer to my position that the antinuclear arm of the “environmental movement” is mainly funded and influenced by the multinational petroleum industry?

        If cutting emissions by as much as 50% over old coal technology is good, why wouldn’t a group like UCS get really excited by a technology that cuts lifecycle emissions by something like 98.5%. (That is computed using 1100 gms CO2/kw-hr for coal and 17 grams CO2/kw-hr for the lifecycle emissions of a nuclear plant. I actually believe that the coal number is a little low and the nuclear number is on the high side.)

        The ONLY logical explanation I can find is that the UCS has been paid or influenced by the hydrocarbon establishment. I do not think that the relationship is new.

        • Atomikrabbit says:

          Unfortunately, the numbers that will matter are not measured in ppm CO2, gms CO2/kw-hr, or deaths/MW but in $ – as in $ spent on marketing, PR, political contributions, and lobbying.

          The nukes win hands-down on the former, and forfeit the game on the latter.

          Sorry for the pessimism, but I have been watching this game for 32 years now – unless the new medium of the internet is the game-changer, I can’t be enthusiastic about a different outcome.

        • DV82XL says:

          It’s a given that groups like UCS have been bought, as has many other once legitimate social conscience organizations. Few are little more than PR mercenaries for the highest bidder. However that they have turned into this is also an indication of how irrelevant they have become. Healthy advocacy groups have active memberships that see to it that positions are debated as a consequence while they might agree on the issue of AGW as something to worry about, very rarely will you see conformity on policies like backing one solution.

          The real problem with these groups is that the media grants them far more status and influence than they warrant. This is a riff on the Association approach in propaganda, which is the technique of projecting an elevated standing of a group to get the target audience to identify with a recognized authority. What they are trying to do is create the illusion that weight of expert opinion falls on their side even though this is far from the truth. This is done to try and isolate those who disagree and paint them as holding a fringe viewpoint.

          This is why it is imperative that the pronuclear side cultivate its own PR apparatus to answer these attacks, not just for advocacy per se, but to show members of the public that support nuclear that they are not alone, that they too belong to a large group whose opinions need to be heard. As long as pronukes believe they are only part of a fringe they can never project any sort of presence into the debate which permits the other side to paint itself as the popular front facing down the evil ‘nuclear industry.”

          We have to start pulling our heads out of our back ends and behaving like an isolated minority – we are not, but we cannot leverage what support we do have with the public until someone, somewhere raises a flag that can be rallied around. Until then we are granting the opposition the right to set the agenda.

          Rob Gauthier

  2. Joel Riddle says:

    DV8, with your comment here, you have helped point out one of the reasons that I think I am much more open to believing the science of anthropogenic climate change than several jof my friends of a similar age (who either already do or will soon have PhD’s), I do not yet own a home, but they do. As someone who is not yet a homeowner, I am not locked in to a suburban lifestyle, so I can more easily adapt if regulations change in the near-term.

  3. John Tucker says:

    Gas rebranded as “green energy” by EU

    Victory for gas lobby as aims of €80bn EU innovation programme altered to channel money to ‘low-carbon’ fossil fuel ( http://www.guardian.co.uk/environment/2012/may/29/gas-rebranded-green-energy-eu )

    Of course Gas was behind the German nuclear pullout from the beginning:

    World: Europe Germany plans to scrap nuclear power- Monday, December 14, 1998
    ( http://news.bbc.co.uk/2/hi/europe/234949.stm )

    So in late 1990s while chancellor he planed the withdrawal from nuclear power. As Chancellor, he was also a strong advocate of the Nord Stream pipeline project, ( http://www.nord-stream.com/press-info/press-releases/nord-stream-wins-inaugural-pipeline-project-of-the-year-award-396/ ) to supply Russian gas directly to Germany, which was recently completed. After leaving government service he has become the chairman of Nord Stream AG Shareholders’ Committee ( http://www.nord-stream.com/about-us/our-management/ ) and was also made a global manager for the Rothschild investment bank.( http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aGKZjqWegR1Y&refer=germany )

    But Back in 2005 immediately after leaving German government service this wonderful article appeared:

    Schroeder Accepts Russian Pipeline Job ( http://www.washingtonpost.com/wp-dyn/content/article/2005/12/09/AR2005120901755.html )

    – I put all the supporting links in so check them and feel free to copy and paste everywhere.

    • Scott Day says:

      Very good work John, be careful, through your clearly very thorough research you could be getting close to the truth. Thank you for the links these will become helpful in several of the debates that I constantly find myself in.

    • James Greenidge says:

      John. you said it all! Isn’t it totally amazing how the media’s hushed up on global warming (it’s just all “green” talk now!) and forget reminding all that gas is a fossil fuel.

      But almost grim to me now is (here in NYC at least) I caught two commercials by “Vote Energy” and they tout domestic oil, gas, wind and solar (I think hydro too) to help break out Middle East energy bind, but ZIT about nuclear — at least on TV! Has anyone caught that?

      James Greenidge
      Queens NY

  4. Scott Day says:

    @John, that’s pretty sad to hear re: NY, too bad that a big chunk of (if not all) the sizable hydro capacity has been tapped here in the US and all it takes is one dry season to make it a really toasty summer in your fair city. Energy will be no problem as long as we continue to shift manufacturing overseas and then bulk up on our datacenters outside the US. (sarcasm intended)

    One has to look no further than the German aluminum industry to see what happens with failed pipe dream energy policies. It will be interesting to watch Germany industry take their corrective actions, and watch the solar/wind/etc. fans say “no, it’s not because of energy prices – really!”

    • Curtis says:

      @ Scott – “It will be interesting to watch Germany industry take their corrective actions, and watch the solar/wind/etc. fans say “no, it’s not because of energy prices – really!””

      I’m predicting right now that they start laying blame on the Decommissioning costs of Nuclear for any increases.

      • Twominds says:

        I just now saw on a german TV channel a spokesman of the SPD socialist democrat party, saying that brown coal is part of the solution in the Energywende. I can only hear this as ¨as long as we can keep nuclear down, anything goes¨. No mentioning of CO2 or other pollution. Or the extensive open mining that comes with it.

        This is the world upside down…

  5. Jerry says:

    The thing about natural gas is that as long as it has some CO2 emissions, use of the fuel will be subject to taxes and control in the name of climate change. They demand we massively reduce our energy consumption, because of these emissions. Only nuclear with its zero emissions can free us of the anti-energy agenda.

    • Jonathan says:

      Count me among those who are concerned that climate change mitigation schemes may be worse than climate change effects. I work in an area with a high level of violent crime, but live in the safe suburbs, and there are a LOT of us here in flyover country who can’t readily move to a city with good public transportation (not to mention the effects on the poorest countries). Sorry, just the way it is.

      The bigger issue for me is peak oil (not because we’re going to run out, but because it’s stupid to burn something you might be able to use for something else). Once I became convinced of peak oil, I bought nuclear stocks.

  6. James Greenidge says:

    DV82XL says: “This is why it is imperative that the pronuclear side cultivate its own PR apparatus to answer these attacks…We have to start pulling our heads out of our back ends and behaving like an isolated minority…”

    I am the proud owner of a (Commodore) Amiga 500 computer (any Amy-users know how that feels!) from 1987, and this beauty did tricks back then that left PCs and Macs in the dust. Thousands of colors, stereo, super sound chips, multi-task AND multi-screens (you hardly see that today!), duo CLI and GUI and the list goes on. It would not be an exaggeration to say Amy was rubbing close to what XP or Mac OS 10.1 was performing in 2001+ back in 1988. The Amiga would’ve trounced Apple and IBM’s PCs in spades — had Commodore the marketing wisdom and keen to realize how to hawk the technological wonder it had on its hands (kind of like Xerox H.Q. being clueless of the potential of its own Parc creations). The Amiga — a peerless and tech superior computer in its day — went belly-up because of inept and juvenile marketing in spades, and the parallels with how nuclear energy’s advantages and enviable record is being presented(?) to the public today is strikingly and sadly similar to me, IMHO.

    James Greenidge
    Queens NY
    (You can catch the brilliant and sad history of the Amiga on YouTube. Whip out a Kleenex!)

    • DV82XL says:

      Nuclear energy is not at risk of disappearing regardless of how many times the antinuclear side asserts that it is. Globally, there are in fact, twice as many reactors being planned as there was in the months before Fukushima. In short outside North America, the Nuclear Renascence proceeds apace. Even here support for new nuclear builds is running at around 6 out of 10 in favor.

      The reason that there isn’t more support is that the public is being inundated with propaganda that tells them that opposition to nuclear is high, and this has the tendency to isolate those who do believe in it, essentially preventing them from being seen, or acting as a bloc.

      Keep in mind that what support there is has developed and grown in this sort of vacuum, and that in it self is rather astonishing and should serve as a clear indication that the message is not that difficult to understand. What is needed now is real leadership and real organisation that will make this slim majority grow, and begin to exercise its political influence.

    • Michael Pelletier says:

      Lyrics from the song in the video above:
      —–
      Should Ukraine join NATO,
      Or should Serdyuchka sing of us,
      We won’t be angry – no need to fight,
      We’ll just cut the gas to Ukraine.

      Europe has daily problems,
      American special forces are already there,
      But we’ll just smile – it’s their own business,
      But in the night we’ll cut the gas to Europe too!

      Only the Belorussians are normal peaceful folk,
      They respect Father Lukashenko,
      And drink to our health,
      So we’ll give them a pleasant surprise,
      Cutting the gas for Ukraine and Europe both!

      If we don’t soon see Russia leading the long list
      of European countries once again,
      Then we will go to their Eurovision,
      And stop that farce!

      In this life, I tell you humbly,
      We can solve any of our problems!
      We just need to find the Gazprom valve,
      To cut the gas to everybody, just in case!
      —-

      I wonder if Germany is looking forward to being Russia’s b*tch.

  7. Max Stanford says:

    Do you think there’s a possibility that the demand for natural gas will meet the supply because natural gas’ substitutes, such as coal, are being hit with crumpling regulation?

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