The Bears and the Bulls wrestled to a stalemate this week. For this seven-day report period, the average 12-month closing price for natural gas on the New York Mercantile Exchange (NYMEX) was almost identical to last week's closing price. The 12-month average price for peak power on the PJM rose 1%.

Perhaps it was the arrival of Spring that brought a calmness to the energy markets and kept prices in check this week. Spring officially "sprung" Thursday, March 20th. The arrival of Spring is a good thing because it means we are entering  the "shoulder season", when demand for heating and cooling generally subsides. 

Although energy prices closed relatively flat this week, the Bears and the Bulls are set for a big pricing battle over the next few months. The Bears argue that demand will be greater than supply this summer, giving way to to price increases. However, the Bulls argue that production will be large enough to meet demand and that as a result, prices will fall or remain stable. 

Here are the Bull's arguments for higher prices: The Bulls point to the fact that the natural gas storage fields are operating near  an 11 year low and are 48% below the five-year average. Two years ago, the natural gas storage levels were 54% above the five-year average. The need to re-fill these caverns during the summer months will create an additional demand component and could place upward pressure on energy prices during the summer months.

Additionally, the Bulls point to the fact that more and more power plants, incurring peak usage during the summer months, are running on natural gas rather than coal. According to the EIA, between 1990 and 2010, more than  50% of the U.S. electric  generation came from coal. For 2013, some EIA data shows that  power production from coal dropped to approximately 37%. Conversely, the consumption of  natural  gas by the power plant sector has grown every year since 2009 and is over 28%. 

Here are the Bear's arguments for lower prices: The Bears point to the fact that natural gas production is at an all-time high. Natural gas production is flowing at record-high levels because of the shale gas phenomenon. Here is a fun fact: In a recent article in Gas Daily, it is noted that  "If the Marcellus Shale were a country, its gas output would rank seventh in the world surpassing Saudi Arabia, China and Norway" according  to data released  by the EIA.  The Bears argue there is enough gas production  to keep prices stable.  

My concern is that the Bulls may win the battle if we have to deal with both an unusually hot summer and this huge storage deficit at the same time.  Stay tuned.  If price protection is important for your budget, April and May will be good months to discuss an early renewal strategy.