Thursday, February 27, 2014

A tale of two natural gas markets

In Ohio, where residential natural gas prices are significantly lower than in Pennsylvania already, the prices are falling further. Go figure. Something in that supply-demand thingy makes me wonder how that works given the glut of supply in Pennsylvania in recent years. I just can't figure a way to arbitrage natgas from just over the Ohio border all of a few miles away.Kind of a strange concept to try and bring natural gas into Pennsylvania these days, but there is some real money to be mad if you could figure out how to do it.

But if you missed it, note what is happening to some consumers who opted for (something a bit closer to) free market pricing in the electricity markets. Was a good deal in the short haul may not be working out in the long run. Again, be wary of the big shiny object. Why the big spike in electricity prices? It also comes back to what is happening in natural gas markets.

The explanation of course is that much of this is not about aggregate supply, but distribution. The development of pipeline infrastructure in Pennsylvania is soon to become a bigger issue than the actual fracking ever was.  That isn't a new issue either for Pittsburgh.  In the past, the issue of natural gas pipeline capacity to Pittsburgh was a bigger news item than today. There was once a time when a proposed diversion of natural gas capacity away from Pittsburgh prompted Mayor Lawrence to say "America's entire economy will be thrown out of line if Pittsburgh does not get the additional (natural) gas."  As goes Pittsburgh so goes the nation? 

Anyway, you can't have it both ways. Note the two big natural gas stories of late: Pa. firms expect natural-gas boom to help manufacturing and then this one of many: Price 'turbulence' in Appalachian shales to last through 2016: TPH official. Nobody connects the two stories?


Anonymous MH said...

I just can't figure a way to arbitrage natgas from just over the Ohio border all of a few miles away.

The obvious option seems unsafe.

Thursday, February 27, 2014 8:48:00 AM  
Blogger C. Briem said...

That is a great, if terrifying, picture.

Thursday, February 27, 2014 7:04:00 PM  
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