The weather in the Gulf of Mexico is turbulent, but energy prices have been relatively stable. For now, natural gas and electricity prices are trading in a tight range. For this seven-day report period, the average price for natural gas on the NYMEX fell less than1%. The 12-month average price for peak power on the PJM rose 1.7%.
As you can see from the graphs elsewhere in this newsletter, natural gas and electricity prices have been range bound over the last seven weeks.
In the past, a hurricane like Isaac in the Gulf of Mexico would have spooked the marketplace and placed upward pressure on energy prices. Producers fear hurricanes. During Hurricane Isaac 72% of the offshore gas rigs in the Gulf were shut-in.
So, why did the natural gas and electricity rates remain relatively flat during this hurricane? According to the U. S. Energy Information Administration, "the impact on the domestic market was less severe than it might have been in the past because Gulf of Mexico production represents a smaller portion of total U.S. production today than 5 to 10 years ago due to the dual effect of waning Gulf of Mexico production and increasing onshore production."
In other words, onshore shale gas formations have diversified our country's supply assets. Onshore natural gas production from the shale formations now account for more than 25% of the United States' gas production.
However, do not be lulled to sleep. The Gulf of Mexico supplies are still a big part of the supply chain. Hurricane season runs from June 1 to Nov. 30.