Hoarding is exactly what the government is doing right now by filling the SPR, and frankly it's the best thing that could happen. It drives prices up. High prices encourage demand destruction. They also finance new well development. The hoarded oil gives us a buffer to fall back on once shortages become more prevalent. High prices are what we need in order to adapt to what's coming, and the sooner they happen, the better.
Joined: Sep 03, 2007 Posts: 553 Location: Sunny Virginia, USA
Posted: Mon May 12, 2008 10:37 pm Post subject: Are NG prices about to plummet?
I admit, I'm somewhat ignorant on how the market works, but I saw on TV today how the City of Richmond will be locking in a price for about 20% of it's gas supply and signing a long term contract for below current market price on natural gas.
No mention on how this price break is going possible and few details were provided overall, but my antenna are twitching. Why would anyone make such an offer? How many cities are signing such agreements?
Since I'm a Libertarian and a cynic (is that redundant?), I am instantly thinking that the local government is making some sort of mistake and in the end will be paying much more than they will need to pay.
Can someone explain to me how I'm mistaken or how this is going to work? _________________ When somebody makes a statement you don't understand, don't tell him he's crazy. Ask him what he means. -- Otto Harkaman, Space Viking
Posted: Mon May 12, 2008 10:40 pm Post subject: Re: Are NG prices about to plummet?
jlw61 wrote:
I admit, I'm somewhat ignorant on how the market works, but I saw on TV today how the City of Richmond will be locking in a price for about 20% of it's gas supply and signing a long term contract for below current market price on natural gas.
No mention on how this price break is going possible and few details were provided overall, but my antenna are twitching. Why would anyone make such an offer? How many cities are signing such agreements?
Since I'm a Libertarian and a cynic (is that redundant?), I am instantly thinking that the local government is making some sort of mistake and in the end will be paying much more than they will need to pay.
Can someone explain to me how I'm mistaken or how this is going to work?
Large-scale deals for energy are often paid at discounts. Aluminum smelters in Washington state, for example, get big discounts on electricity. _________________ Abundance - what a concept!
Joined: Oct 18, 2004 Posts: 1630 Location: kiwibush
Posted: Mon May 12, 2008 11:18 pm Post subject: Re: Are NG prices about to plummet?
Call yourself a Libertarian and you don't even know how "economically liberal" markets work....lol....you're funny.
A long term supply agreement with secure customer is a plum deal....and worth a nice discount as a carrot. _________________ Bugger me, I hear oil's runnin out mate!
Joined: Sep 03, 2007 Posts: 553 Location: Sunny Virginia, USA
Posted: Tue May 13, 2008 7:59 am Post subject: Re: Are NG prices about to plummet?
americandream wrote:
Call yourself a Libertarian and you don't even know how "economically liberal" markets work....lol....you're funny.
A long term supply agreement with secure customer is a plum deal....and worth a nice discount as a carrot.
Thanks, I'm quite aware of how the market works. Perhaps I needed to expand upon my original post.
The news story depicted city officials talking as if this is some sort of new deal that was not available before. I was under the impression that the city has always had bulk agreements so that they could get better prices, as would any large user of a commodity. But now we have "even lower" prices being locked in for a long term. This has my antenna twitching because it very possibly means:
A) The reports of the US NG inventories will be going up in the near future are true and the government is, in it's infinite wisdom, locking in a price that will actually be higher than market.
B) The city has not been buying in bulk in which case why not? They've been wasting money, which is, of course somthing that government seems to love doing.
So while I research B, how about people actually check to see if there is a sudden flurry of new "lower than market price contracts" are being offered to city governments? _________________ When somebody makes a statement you don't understand, don't tell him he's crazy. Ask him what he means. -- Otto Harkaman, Space Viking
Joined: Oct 15, 2004 Posts: 2021 Location: Arkansas
Posted: Tue May 13, 2008 8:13 am Post subject: Re: Are NG prices about to plummet?
Quote:
A) The reports of the US NG inventories will be going up in the near future are true and the government is, in it's infinite wisdom, locking in a price that will actually be higher than market.
This site has a thread on weekly inventory reports that should answer your question about inventory levels. Typically, NG inventories build in the summer in preparation for winter demand.
Quote:
B) The city has not been buying in bulk in which case why not? They've been wasting money, which is, of course somthing that government seems to love doing.
No one here can answer this question for you, only your city can. Most states have FOI laws which would allow you to request access to the information which would answer this question. For example, just ask for a copy of all previous agreements and prepare those with the current one.
Joined: Sep 03, 2007 Posts: 553 Location: Sunny Virginia, USA
Posted: Tue May 13, 2008 8:33 am Post subject: Re: Are NG prices about to plummet?
seahorse wrote:
Quote:
A) The reports of the US NG inventories will be going up in the near future are true and the government is, in it's infinite wisdom, locking in a price that will actually be higher than market.
This site has a thread on weekly inventory reports that should answer your question about inventory levels. Typically, NG inventories build in the summer in preparation for winter demand.
Quote:
B) The city has not been buying in bulk in which case why not? They've been wasting money, which is, of course somthing that government seems to love doing.
No one here can answer this question for you, only your city can. Most states have FOI laws which would allow you to request access to the information which would answer this question. For example, just ask for a copy of all previous agreements and prepare those with the current one.
Thanks, already there... I've started with the original news story and the reporter claims that the city of Richmond has never had a bulk agreement for NG. Further, the reporter emphisized that residents could see savings later this year because of it. When I mentioned that he emphisized "could" I got a half chuckle and a "we'll see" in reply.
Next stop... city hall (I'm headed for downtown Richmond, in a few days, for another reason, so I'll just combine the trip). _________________ When somebody makes a statement you don't understand, don't tell him he's crazy. Ask him what he means. -- Otto Harkaman, Space Viking
Joined: Jan 14, 2008 Posts: 321 Location: The Yukon
Posted: Tue May 13, 2008 1:45 pm Post subject: Re: Are NG prices about to plummet?
Based on fundamentals (considering projected inventories, etc) nat'l gas should be $8. But its historic link with crude (due to subsititution options) indicates that the price should be $17. Until the oil price bubble collapses, there is little clarity of the future for this commodity.
Using dollar cost avg'ing principles in this environment for 20% of requirements would be considered prudent. _________________ www.TrendLines.ca/scenarios.htm Home of the Real Peak Date ... set by geologists (not pundits)
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