Last week we reported that natural gas and electricity prices had risen 8% since May 3, 2012. This upward trend continued this week. For this seven-day report period, the 12-month average price for natural gas on the NYMEX rose 4.2%, while the 12-month average price for peak power on the PJM rose 2%.
Weather was a big variable that placed upward pressure on energy prices. The week started with Tropical Storm Debby threatening the gas and oil rigs along the Gulf Coast. The U.S. Energy Information Administration reported that 17% of the rigs along the Gulf Coast were shut-in by Tuesday morning in preparation for this storm. Shut-ins typically spook the markets and thus create price spikes.
In addition to the season's first storm threat in the Gulf of Mexico, the six-day forecast called for the arrival of some very hot temperatures in most parts of the country. Hot temperatures can create a spike in energy demand because everyone flips the air conditioners to the cool mode. These demand spikes normally spook the markets and thus place some upward pressure on energy prices.
Stay tuned. The big question is whether or not the summer temperatures will be hot enough to keep the power plants running at full speed.