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2014 natural gas update

May 9, 2014
By Tom Jankowiak, Utility Management Group
 
Consumers opening their natural gas invoices over the past couple months experienced somewhat of a surprise. After benefitting from low natural gas prices over the last five years, the market for February and March spiked considerably. This spike was caused by a combination of factors, the two most important ones being this winter’s temperatures and issues with the pipelines that transport gas to the Chicago market. 
 
While the pipeline issue has been resolved, the impact of last winter’s temperatures is going to linger into this coming natural gas season (April through March) due primarily to the depletion of our national storage levels. As with most markets, the natural gas market is driven by supply and demand, so having more gas stored for the upcoming winter tends to hold down prices. In recent years, storage levels have ranged from average to near record highs. Storage levels currently are at a low not seen since May 2003, as we burned through our supply this winter to meet record demand. This means producers not only will have to supply the natural gas consumers require, but will have to replenish storage as well, increasing the overall demand for gas. Based on current projections, analysts believe it’s unlikely that last year’s positive storage levels will be restored by November.
 
Storage levels are one of many factors driving the natural gas market, with temperatures, oil prices, the economy and geopolitical events also playing a role. We’re currently facing a great deal of uncertainty as to what the market will do over the next 12 months, as one or more of those factors turning positive or negative can cause the market to fluctuate from the lows we saw prior to January to highs we haven’t seen in a number of years. 
 
Given this uncertainty, it’s important to understand the impact your natural gas budget has on your overall budget, as well as what options are available to you. If a spike in prices has a negligible impact on your overall budget, you may want to consider a variable rate program. The offerings from suppliers we work with have averaged between 10 percent and 15 percent below the utility’s rates. If budget certainty is more important to your organization, you may want to consider locking the rates for at least a percentage of your overall usage. Doing so does not guarantee savings compared to the variable rate program, but it does offer protection against future spikes in the market.  
 
Because budget concerns vary and customers do have options that can be tailored to their needs, it’s important to work with a supplier who offers the flexibility to customize a program for your individual budget concerns, as opposed to trying to sell you on the benefits of the program they offer. Once you understand the options available to you, budgeting for your natural gas costs becomes a much more manageable task.
 
Utility Management Group has been providing natural gas and electric service for close to 14 years, and our services are endorsed by the CATA. Please contact our office at (630) 279-0117 to discuss your energy needs or to arrange a time to have one of our consultants meet with you in person.
 
 

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