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Three Factors That Will Impact the Energy Market – Spring 2021

Are Gas Prices Increasing? Unless you’re driving an EV, you’ve undoubtedly noticed gas prices are rising at the pump. Because

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Are Gas Prices Increasing?

Unless you’re driving an EV, you’ve undoubtedly noticed gas prices are rising at the pump.

Because of the tight correlation between oil drilling and natural gas production, higher natural gas and electricity prices are likely also on the horizon, with several critical elements behind this.

In this article, I am going to briefly discuss the three main factors that will impact the energy market as we move into 2021’s summer shoulder.

At the end of this article, I will also cover how you can avoid increasing energy rates by finding competitive rates and locking them in long-term with a fixed-rate energy agreement.

Part of helping you find lower energy rates for your business includes keeping you updated on the energy market and letting you know when it’s the right time to buy.

You can find routine updates published by our Senior Commodity Analyst by clicking here.

What is Natural Gas’ Relation to Energy Rates?

Good question!

If you’ve been taking advantage of energy choice, you probably already know that the natural gas market and energy production are very highly connected.

Natural gas is currently the single largest source of power for the generation of electricity; providing the U.S with over 40% of all the electricity we use. Therefore, natural gas pricing and electricity rates are highly correlated, and natural gas’s recent pullback is likely a buying opportunity based on the following three factors:

  1. The decrease in demand as we enter spring has created a brief opportunity to secure lower rates before demand increases again as we approach hotter weather in summer.
  2. The Energy Information Administration (EIA) expects Liquified Natural Gas (LNG) exports will continue increasing, and relatively flat production of Natural Gas and the EIA is forecasting higher prices in 2021 & 2022.
  3. As you can see in the natural gas chart below, over the last year this market is forming a pattern of higher-highs and lower-lows. I’ve also included a 20-year chart that shows each time natural gas was as low as it has been this year, the average price was always higher for at least 36 months.
natural gas price

How Fixed-Rate Energy Contract Can Protect You Against Increasing Energy Rates

When shopping for lower energy rates, one of the most popular options is a fixed-rate contract. 

Fixed-rate energy contracts are perfect when minimizing your risk against a potentially rising energy market. 

By finding a competitive energy rate, you can “fix” that price over the course of 12, 24, or 36 months meaning that you’re guaranteed that price the entire time. 

When faced with an increasing market, fixed-rate energy contracts are a great way to reduce costs and avoid future increases. 

If your company is already contracted to an energy supplier, you can apply what’s called forward start pricing. Forward start pricing is a program that allows you to secure today’s low rates, that pick up when your current energy contract or agreement ends. 

If you’re already working with an energy broker or advisor, here’s why we suggest that you anyway reach out to us to see if competitive rates exist:

  1. We may have a supplier in our network that your current energy advisor may not have, and so could find lower rates.
  2. As competition to your existing energy advisor, our competition is only going to benefit you, because anything we come back with will either be lower or you won’t need to secure the rate.
True story, last week one of our energy advisor spoke to a company who used a considerable amount of energy each month. That company had been working with their energy broker for quite a number of years and insisted that he was taken care of. After looking at his energy bills, we noticed that the rates he was paying were 5 cents higher than what we were finding. Needless to say, he made the switch. This goes to show that competition is only going to benefit you in finding lower energy rates. 

 

I hope that you’ve found this information helpful. 

James Lightning

James Lightning
Senior Editor, Energy Professionals
info@energyprofessionals.com
(844) 674-5465

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