Like the stock market, energy prices do not know whether to go up or down. Last Friday, we reported that the 12 month average price for natural gas on the NYMEX fell 5.2% and the 12 month average price for peak power on the PJM grid fell 3.2%. However, for this 7 day report period, the 12 month average price for natural gas on the NYMEX rose 3.9%, and the 12 month average price for peak power on the PJM grid rose 2%.
Does this sound familiar? Energy prices have been chopping sideways for more than a year. The bottom line is that natural gas and electricity prices continue to trade near a seven year low because the world economies are sluggish which means lower demands for energy. Then, from the supply side, natural gas supplies are higher than expected because of the shale gas discovery. According to a report in the August 11th, 2011, Washington Post, "shale gas accounted for less than 2% of total U.S. natural gas production in 2001: it is now close to 30 percent, and the Energy Information Administration projects that it will amount to 45 percent of domestic production by 2035." In other words, supply is high and demand is low for now.
Many variables can affect the direction of energy prices. At this moment in time, all eyes are on the economy and the weather. The summer is not over yet and hurricane season is still in play.