After two weeks of price increases, natural gas and electric prices were relatively flat this week. For this seven day report period, the 12-month average price for natural gas on the NYMEX fell 1% while the 12-month average price for peak power on the PJM rose 1.5%.
Since May 3, 2012, hot weather has placed upward pressure on energy prices. Natural gas prices have risen 13% and electricity prices have risen 3.5% since the unusually hot temperatures arrived in the beginning of May. High temperatures cause power plants to burn natural gas which produces the extra electricity that is needed to operate the air conditioners. Demand spikes can place upward pressure on energy prices.
Luckily the weather moderated this week and so did the energy prices. However, forecasters are calling for the return of hotter than normal temperatures next week. If these hotter than normal temperatures continue through the summer, some analysts fear that the current natural gas bubble could be much smaller by the time we hit November. It is interesting to note that the natural gas surplus has shrunk from 55% above the five-year average to 22% above the five-year average since May 3, 2012.
The big question remains the same. Will the summer temperatures be hot enough to erase the gas bubble?