Note: Energy Update did not publish last Friday (Nov. 25) due to the Thanksgiving holiday weekend. This issue covers a two-week report period.

Natural gas and electricity prices reversed their direction for this report period. Instead of falling, as we reported in the previous two issues of Energy Update, energy prices increased this week. The 12 month average price for natural gas on the NYMEX rose 5%, and the 12 month average price for peak power on the PJM rose 3%.

As you may recall, natural gas and electricity prices fell during the first few weeks of November. Most analysts suggested the sluggish economic growth and mild weather kept a lid on energy demand. This weak energy demand did place some downward pressure on prices. But, can you guess what placed upward pressure on energy prices this week? The news wires reported that the U.S. economy is showing signs of growth in the manufacturing sector, job creation and consumer spending. Additionally, the 6 -10 day forecast predicted that most of the country would experience colder than normal temperatures during the next week.

Thus, if sluggish economic reports and moderate temperatures can place downward pressure on energy prices, then it is fair to expect that positive economic forecasts and cold temperatures can place some upward pressure on energy prices.

Although prices crept up this week, it may be difficult to sustain the upward trend because storages are robust and dry gas production is strong. However, as we saw this week, demand is the wild card. Stay tuned.

Another variable to watch: The U.S. Environmental Protection Agency, the New York legislature and the West Virginia legislature continue to study the impact that shale gas drilling has on water supplies. State Senator Tony Avella from New York announced he wants to completely ban shale gas drilling due to concerns about water pollution.