Energy Price Volatility With Regards Natural Gas

3973 Words Mar 10th, 2015 16 Pages
Executive Summary
In this paper, energy price volatility with regards natural gas will be expounded on the essentials of market requisites. The report explains a number of factors that lead to price differences in the market as well price volatility implications to the oil and gas companies and industry. Supply and demand factors play a major role in shaping natural gas prices in addition to other factors such as war, environments and OPEC. Value-at-Risk (VaR) as a tool to manage risk and quantify market risk is used in this industry to understand causes and implications for corrective actions to be put in place.
Introduction
The global economy is driven by energy markets. Energy does not only play a significant role in consumer products but also an important input in nearly all the industries. (Efimova O. and Serletis, A. 2014)
The use of natural gas will be used to depict the various factors and sources contributing to price volatility in the market. In evaluating the degree of price volatility of the commodity, a 12-month period of Henry Hub Spot Prices in United States will act as a case study.
This price volatility analysis utilizes portfolio calculation techniques such as the expected return, the variance and standard deviation. Sources of uncertainty that affect natural gas prices in the oil and gas industry will be discussed and consequentially, the implications that arise from such price differences within the companies.
In this paper, assessment of possible…
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