Essay On Energy Price Volatility

What are the costs and benefits of using natural gas? What factors affect its supply and demand?

The United States consumes more than 25% of the world’s petroleum products which is a large percentage, considering only 3% of the world’s oil reserves are produced by the United States. Given the demand for petroleum products such as gasoline, understanding why Crude oil prices have skyrocketed in recent years, is not hard. According to the article “Ending America’s Oil Addiction,” the surge in crude oil prices can be reduced in large part to the simple concepts of supply and demand. (Cooper, 2008)

It turns out that the market for natural gas is a very competitive one and that there is in fact a shortage in supply that is causing the price to increase. Natural gas must be drilled for and there are only a certain number of active companies that drill and they all have a set amount of capital. In the short run the supply of natural gas is very inelastic because they cannot just produce more gas. They would need

While this is great to the consumer, the renewable sector’s growth was more stagnant. Attention was diverted to use another greenhouse producing fossil fuel rather than a clean renewable. A trend in U.S. Energy Information Administration’s (2017) data showed renewable sector’s power production since 2008 grew only 5.7% as compared to natural gas production 18%. Another disadvantage to the diversion from renewables is the additional carbon dioxide generated from these additional plants operating. “About 24 percent of U.S. carbon dioxide emissions are related to natural gas in 2011” (Natural gas prices. (n.d.)). The replacement of coal-fired power plants with natural gas has let to a decrease of the green house gases, mainly particulate matter and sulfur dioxide emissions. “Sulfur dioxide (SO2) emissions produced in the generation of electricity at power plants in the United States declined by 73% from 2006 to 2015, a much larger reduction than the 32% decrease in coal-fired electricity generation over that period.” U.S. Energy Information Administration (2017). This shows that more efficient control equipment can be used to almost eliminate the trace amounts of sulfur dioxide in natural gas.

Economic benefits of the natural gas industry are intimately tied to the market price of natural gas – which historically, has demonstrated high volatility. Recently the price for oil and gas has plummeted. While natural gas supplies steadily accumulated in the US, Canada’s main export market, decreasing revenue and profits. This has resulted in consolidation of oil and gas companies, loss in jobs, and delay/cancelling of new projects (e.g., LNG projects on BC’s coast). Given this financial context, the Canadian gas industry needs to streamline their operations (i.e., increase efficiency and productivity) and explore alternative markets by, perhaps, moving methane up the value chain and creating value-added products (i.e., petrochemicals).

With having 400,000 natural gas wells across the United States this creates thousands of jobs for people. In 1980 fracking companies supported 267,000 employees according to the Federal Reserve Bank of St. Louis (Hassett, Kevin A.) In 2011 alone the United States produced 850,983 cubic feet of natural gas from shale gas wells (The Numbers.) Per thousand cubic feet of natural gas costs about 4.24 dollars, this comes out to a profit around 36 billion dollars (Hassett, Kevin A.) Not only does it have large profits but it has a huge direct effect on trade balance with the US and other countries. Between 2007 and 2011 natural gas imports decreased by 25 percent, with this four year decrease Energy Information Administration predicts that the USA will become a net exporter of natural gas by 2020 (Hassett, Kevin A.) Though “The word in the world of independents is that the shale plays are just giant Ponzi schemes and the economics just do not work,” says a spokesperson from IHS Drilling Data, an energy research company (The Numbers.) Shocking news that the economics just do not work with the gas companies many are finding out that it’s not as cheap to extract from the shale as the they intended it to be (Hunt, Spencer.) According to hundreds of industry emails and internal documents, and an

Within the last year, oil prices in the United States have dropped significantly. As oil drilling in the United States has reached its highest level in over 30 years, consumers are reaping the benefits. Among these gains are record-low prices at the pump, and cheaper oil to heat homes. However, oil prices did not just drop on their own; multiple factors contributed to the fall. Increased domestic production, declining global demand, and competition from other oil-producing nations had led to rapidly dropping oil prices across the United States.

The American energy revolution has done more than just provide record amounts of oil and natural gas to fuel our transportation needs or generate electricity and heat our homes, schools and businesses. Increased American energy production has lowered the cost of energy and manufacturing feedstocks, which helps to cut energy and materials costs for American manufacturers, particularly producers of steel, chemicals, refined fuels, plastics, fertilizers and numerous consumer products. U.S. industrial electricity costs are 30 to 50 percent lower than those of our foreign competitors, according to a 2015 study from the Boston Consulting Group (BCG). American manufacturing costs are now 10 to 20 percent lower than those in Europe and could be 2 to

Natural gas is very popular it was oversold and bounced backwards not unexpected . How is natural gas prices caused to go up? Well it all starts by weather , If it is colder than normal weather there are many parts in the united states that there is a lightning which causes a fire under natural gas and that makes the prices go up. Also for a good amount of time, there has been fuel switching by natural gas prices

Countries around the world seek energy independence as most have become reliant on fossil fuels to power their cities and means of transportation – thus their economies. We live in a world of uncertainty, and geopolitical affairs can influence the trends and prices of energy resources – of which include coal, oil, and natural gas. With countries heavily contingent on oil imports from unstable provinces of the Middle East, the gas companies of the United States began to utilize fracking to extract natural gas and oil in order to better control their own destiny, and to create a sense of energy freedom for and employ locals.

There is a great understandable hunger for energy in the world. Increases uses of energy are strongly correlated with the gross domestic product

The price of natural gas on the economy tends to affect all industries, and firms down to the individual consumer. Although there are highs and lows when considering pricing, the overall assessment will, and should confuse the average person, as the perceived devastation affect is almost non-existent when demand seems to be untouched. The changes

markets since December of 2000, when the Commodities Futures Modernization Act removed it from the items regulated by the Chicago Mercantile Exchange and C.F.T.C. Without control, the price swings in step with the actions of speculators that do not take delivery of the commodity, but wager on the price of future delivery and then sell the contracts if the markup is positive for them. With so many players in the futures markets, the actual users of the commodity are forced to buy the oil on long-term contracts that allow them to benefit from economies of scale, by the size of the purchase, and they get a hedge against inflation by purchasing well in advance of their actual need. Industrial users of oil and its derivatives make contract purchases to lock in a level of supply for their needs, but whenever there is a spike in the price of oil, the industrial users will claim that the spike forced them to raise their prices. We gullibly believe it and some of us pay more and some of us stop buying. The present group is small, and nonexistent when it comes to gasoline purchases. We are addicted to our cars and driving, thus we know the link between oil and gasoline, and we are quick to accept that OPEC raised the gas price theory on the evening news. This long narrative is to tell you that as you look for the shift in the equilibrium point of price to demand, understand that the movement is human nature and not actual market forces. Honest price changes convey information about the product or its manufacture, or its shipping cost, or if a tariff has been imposed. In every case, the data is an honest statement of the burden of material or labor or transport or taxes that has been revealed. With oil, there are too many liars inputting data into the price system for their own benefit. The worst feature of oil is that it is priced by cartels and by speculators and that only by hedging our purchases can we stop the

Niazi, G. S. K., Hunjra, A. I., Rashid , M., Akbar, S. W., & Akhtar, M. N. (2011).

Natural gas is finding its place at the very heart of the energy discussions. The recent discoveries of quite a substantial amount of natural gas in the U.S.A, primarily as a result of the shale gas development, have attracted much interest towards natural gas as a key component of energy supply and have lowered prices well below recent expectations. But in other parts of the globe, prices of Natural Gas remain high and also at the same time: varied. This study seeks to inform discussion about the future of natural gas and will LNG be able to narrow the price diversity quite prevalent in regional respective gas