How to Combat Changes in Fuel Price

Nov. 29, 2012
Natural gas prices continue to creep upward.

Frustrated by fluctuating natural gas prices? You’re not alone. Six months ago, gas prices hit their lowest in 10 years, but weekly data gathered by the Energy Information Administration (EIA) shows costs creeping up again.

The price utilities pay (the monthly settlement price determined by the New York Mercantile Exchange, or NYMEX) ranged around $1.90 per million BTUs (MMBTU) at their low point, notes Rich Costello, president of Acela Energy Group.

But what brought the market here? Costello says the historic low price was a result of three coinciding factors:

  1. Shale gas supply. “It’s so economically feasible to get shale gas out of the ground and there are many places to do that,” says Costello. “We have more supply in the market than usual, which drives the price down.”
  2. The recession. The extra supply is partially due to recession-driven spending cuts, Costello notes – users are consuming less to save money.
  3. Winter temperatures. Last winter was unusually warm, Costello notes, further enabling consumers to cut gas use.

Continued economic improvement could drive the utility price up to $3-4 per MMBTU, which translates to a consumer cost around $6.50 after transportation costs are factored in, Costello predicts.

However, you may be able to partially stabilize your gas costs with a fixed-price contract that locks in current prices, protecting your budget as the economy recovers.

For the long term, consider continuing education to gain the upper hand in negotiating fuel prices, Costello recommends. The Association of Energy Engineers credentials Certified Energy Procurement Professionals with a course on competitively bidding fuel prices.

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