As Natural Gas Prices Surge a Short-Term Pullback May Be on The Horizon
In my March 7th Energy Update I said since the beginning of last year, I warned there was a great
In my March 7th Energy Update I said since the beginning of last year, I warned there was a great
In my March 7th Energy Update I said since the beginning of last year, I warned there was a great risk our energy prices would increase due to the present administration’s restrictive energy policies, aggressive fiscal spending, and quantitative easing by the Fed, leading to systemic inflation in the U.S.
The following 2 charts, serve to verify my concerns with Natural Gas increasing 118% & Wholesale Gasoline increasing 113% since Inauguration Day:
In my Dec 7th, 2021, Energy Update, I said Europe’s Natural Gas supplies were at a 10-year low caused by their green energy policies, which increased the risk of higher prices not only this winter, but long-term since the policies leading to today’s high prices were not abating, they were becoming more entrenched here and abroad.
Early in the 21st century, we experienced higher Natural Gas prices and extreme volatility prior to fracking giving us sufficient supplies to meet our energy needs, but over the last 10 years, we were blessed with a period of lower prices with fracking giving us enough supplies to meet our energy needs.
The question is what are the potential consequences of our long-term commitment to green energy?
In my Mar 7th Energy Update I said the present administration’s energy policies led to decreased production and skyrocketing Natural Gas and Gasoline prices, and pressure from both parties would result in America ceasing the import Crude Oil from Russia, but I believed their long-term commitment to green energy has not changed, and if we move away from a long-term commitment to fossil fuels we are in danger of returning to the period of higher prices and extreme volatility prior to fracking from 2001 to 2011.
Given this possibility, the timing of executing hedgers has become paramount to the effectiveness of your energy policy. Those who heeded my recommendations to secure a long-term fixed rate before rates moved higher are paying less than the available rates today. But if you have not already secured a long-term fixed rate, you may have an opportunity to do so in the near future.
Commodity markets tend to follow seasonal patterns and we may be close to a seasonal pullback during Natural Gas’s spring shoulder period. The demand for Natural Gas and Electricity always declines in the spring and fall prior to increase again during the summer cooling and winter heating seasons.
If you have not already hedged your cost of Natural Gas or Electricity and prices decline during this year’s spring shoulder, I recommend taking advantage of the near-term decline. As I have written in previous reports, we are entering a period of great uncertainty resulting in wild swings in energy prices, and securing fixed rates when prices pull back will be in your best interest.
As I as have repeatedly warned you will look back four years from now, and I believe you will realize there was only one cost of doing business you could have kept stable and avoided increased prices and volatility, your cost of energy for Natural Gas and Electricity. Hopefully, today’s report helped you understand if we experience a decline during this year’s spring shoulder securing a fixed rate for protection against the risk of higher Natural Gas and Electricity prices long-term is in your best interest
Not every client’s risk tolerance and hedging strategy is the same, but the above report will help you put into perspective the risk/reward opportunities. I invite you to call one of our energy analysts to help you plan a hedging strategy appropriate for your situation.
Ray Franklin
Energy Professionals
Senior Commodity Analyst
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