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Why Natural Gas Prices Collapsed

Natural gas prices have collapsed…

Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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Where Are the Best Natgas Prices in America?

Florida. At least they were last week.

City-gate natural gas prices in the Sunshine State briefly hit $14 per MMBtu last Thursday. A level not seen for many years in this region. And certainly above prices elsewhere in America, which are running around $5.

So what happened?

The U.S. Federal Energy Regulatory Commission is still investigating the cause of the price spike. But it appears this was a localized phenomenon, related to pipeline maintenance that limited incoming supplies. At nearby gas transmission zones in Florida, prices remained around $5.

An instructive story. As I've discussed many times, the gas market in the United States (and increasingly the world as a whole) is evolving quickly.

The recent development of shale gas and tight gas in America has changed the game. We now have lots of gas coming from places we never expected.

Meaning there wasn't a lot of planning on how to get that gas from producing areas to major markets, like Florida's cities. America is now scrambling to re-invent its gas architecture.

This is going to mean a period with more price dislocations. And such dislocations create arbitrage, leading to investment opportunities.

For the nimble and knowledgeable in the U.S. gas market, this is a very promising time.

By. Dave Forest of Notela Resources




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Leave a comment
  • Anonymous on August 13 2010 said:
    Very interesting, but incomplete. How does gas mostly selling for $5 go to 14. Yes, it's a spike, but...As for the gas market evolving in the whole world, I would have liked to hear more about that because.....

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