Natural gas rates plunge

Record low overnight temps forced me to dial up the thermostat this morning, bringing back unwelcome memories of last year’s heating bills, which rivaled my monthly mortgage payment.

This year, though, it looks as though we’re in for a break.

Natural gas commodity prices are down 60 percent since the start of the 2009 – about a seven- or eight-year low, according to Kobi Platt, an analyst with the Energy Information Administration at the U.S. Department of Energy in Washington, D.C.

“This is a tremendous swing from last year,” said Platt. “And generally speaking, the lower prices we have seen this year will be passed on to consumers.”

That’ll be welcome news to your readers, so you might want to consider a fall heating outlook soon.

Run it as a personal finance package, contrasting this year’s outlook to last year’s astronomical heating rates. (Keep in mind that the entire natural gas price drop won’t be reflected on residential bills; local utilities have been buying fuel contracts all year at a variety of prices and we don’t yet know what weather or an economic rebound will do to demand.)

You also could stick to a straight business angle by looking at the commercial implications of lower natural gas prices. And they’re more numerous than you might think.

Only about a third of the 20 trillion or so cubic feet of natural gas consumed nationwide each year is used for residential and commercial heath. Another third is used in industrial processes – both as an energy source and as an ingredient in products ranging from fertilizers to plastics. The drop in demand by manufacturers, who’ve reined in production throughout the recession, has a lot to do with the current sky-high inventory levels and low prices.

The final third is used to generate electric power – and with natural gas prices dropping so precipitously, your local utilities might be reducing their reliance on coal even further. That’s another angle to check on, including the implications for electricity rates.

The EIA site’s natural gas portal is a wealth of resources, particularly the narrative monthly short-term energy outlook (sign up for the e-mail feed) and the weekly natural gas storage update – that’s a market mover and a key indicator of future price fluctuations. Don’t worry if you don’t understand this vast and complicated industry – EIA analysts like Platt are available by phone to walk you through the data.

Another angle is retail choice. Some states have allowed competitors to challenge monopoly utilities; here’s an EIA map that shows what’s going on in your area. If you have competitive suppliers, check with consumers to see how that’s working.

Be sure to check with your local utilities themselves and state public service regulators about rates and forecasts, as well as local residential and commercial users.

Come back to Your Daily Tipsheet each morning for advice on where to find sources, background and creative ways to make financial news and trends relevant to your audience.