“The following is an excerpt from Tim Snyder’s “Weekly Quick Facts” newsletter. Tim is an accomplished economist with a deep understanding of applied economics in energy. We encourage you to visit Matador Economics and learn more about Tim. While there, you can sign up for his completely free Daily Energy Briefs and Weekly Quick Facts newsletters.”
I was asked last week, after our series on gasoline and diesel prices and how high those prices could go, my thoughts on the price of Natural Gas, and where they could go.
I have been following Natural Gas prices and Natural Gas inventories for years, so I went to my trusty charts and began to piece together a narrative.
Just this year alone, the price of Natural Gas has doubled. We started the year at $3.73 per million cubic feet (MMCF) and closed business yesterday, at $8.796 per MMCF. Here’s that
I also looked at the inventory chart for Natural Gas from the Energy Information Agency. That chart showed me that natural gas inventories are starting to trend toward the lower end of the five-year average.
Now that we have established the fact that inflation has settled in in all of the energy complex, it's time to drop the other shoe; inventories are not keeping pace with demand. But, unfortunately, there is nothing that can hold them back! We started the year at 3,195 billion cubic feet of gas in storage, and by the end of last week, inventories had dropped to 1,732 billion cubic feet. That's down 40%.
Just about now, you are asking yourself, how much of a share of the overall market does natural gas have in the U.S. It's tied for the largest supplier with petroleum at 32%. The ability for the renewables to increase production is just not there, and demand is resurgent, so the current trend will continue.
But remember that next Wednesday marks the beginning of Hurricane Season and the coming next three months are the warmest of the year, June, July, and August. We will struggle to make ends meet this summer with spiking refined product prices and the cost of natural gas unless something changes; policy-wise!
So, as I see it if we get just a little bit warmer than usual, or we get a stronger Hurricane Season, or Vladimir Putin does something stupid, the risk is there, and we could have the makings of a wild summer!
Timothy S. Snyder, Economist