For the second week in a row, natural gas and and electricity prices climbed upward. For this seven day report period, the 12-month average price for natural gas at the Henry Hub well-head rose 7.65%. The 12-month average price for peak power on the PJM rose 2.9%.
We can blame Mother Nature for these recent price increases. The early arrival of hot temperatures caused a spike in energy demand. Thus, the electric power plants started burning natural gas in an effort to produce the extra electricity that was needed to meet the higher than normal cooling demand. Then, because the natural gas was consumed by the peak power generators, there was less gas available for the storage injections. In this week's EIA storage report, the injection of 83 Bcf was 16% below the 5 year average of 99 Bcf.
In summary, hotter than normal temperatures in the summer can create a temporary supply/demand imbalance and thus place upward pressure on energy prices. The weather over the next few months can definitely impact the direction of energy prices. Stay tuned. The 8-14 day forecast calls for hotter than normal temperatures east of the Mississippi.
There is good news, however, and it is that natural gas and electricity prices are still low relative to the last seven years.