Weather pattern changes are the primary contributor to gas price volatility. Gas prices also show a clear seasonal pattern with higher prices in fall and winter months in response to higher demand for heating. And lower prices the spring and summer months as demand drops.
The largest peak occurs during the winter, when cold weather increases the demand for natural gas space heating in the residential and commercial sectors.
Here is a general breakdown of the demand of natural gas across the some of the main sectors. When it comes to electrical power generation, natural gas power burn has been increasing due to low gas prices relative to coal.
During periods of lower demand, surplus can be injected into storage facilities. The natural gas storage infrastructure can be utilized to accommodate sudden rises or falls in demand, up to a certain point. Overall, natural gas supply is characterized as being quite responsive to a relatively wide range of prices.
Note: Does not include natural gas as a vehicle fuel. Industrial users of natural gas exhibit the least seasonality, ranging from between 22 Bcf/d during the winter and 18 Bcf/d in the summer.
Factors on the demand-side include weather (temperatures), economic conditions, and petroleum prices. Cold weather (low temperatures) increases demand for heating, while hot weather (high temperatures) increases demand for cooling, which increases natural gas demand by electric power plants.
Consumption Driving Patterns In winter, the increase of space heating for both residential and commercial use leads to the surge of demand of natural gas. During the summer, use of natural gas is much lower due to summer cooling through air-conditioning.
Twice every year in the United States, the fuel supply changes. It's known as the seasonal gasoline transition. This change is the biggest reason for the price hike in summer gasoline. Depending on the time of year, gas stations switch between providing summer-grade fuel and winter-grade fuel.
Severe weather can disrupt supply Very cold weather can also disrupt natural gas production. If these supply disruptions occur when demand for natural gas is high, prices may increase more than expected.
winterUse of natural gas has two seasonal peaks, with consumption patterns predominantly driven by weather. The largest peak occurs during the winter, when cold weather increases the demand for natural gas space heating in the residential and commercial sectors.
LACK OF STORAGE But that hasn't happened, in part due to rising overseas demand and worry about additional curtailment of global energy supply. As a result, there is less gas in storage right now than normal, with current storage at 1.567 trillion cubic feet, or about 16% below the five-year average for supply.
Winter Gasoline In winter, gasoline blends have a higher Reid vapor pressure, meaning they evaporate more easily and allow gasoline to ignite more easily to start your car in cold temperatures. This blend is cheaper to produce, which results in lower gas prices at the pumps from late September through late April.
Even when crude oil prices are stable, gasoline prices fluctuate because of seasonal changes in demand and in gasoline specifications.
Gas demand has a high price-sensitivity to changes in weather. Weather pattern changes are the primary contributor to gas price volatility. Gas prices also show a clear seasonal pattern with higher prices in fall and winter months in response to higher demand for heating. And lower prices the spring and summer months as demand drops.
Gas storage levels also plays a key role when looking at supply side. Natural gas in storage provides a valuable cushion to meet peak demand. During periods of lower demand, surplus can be injected into storage facilities.
Over the last few years, the United States has seen the development of new LNG exporting terminals, mostly in the gulf coast region. The demand for natural gas for LNG export to international markets is expected to rise significantly.
Overall, natural gas supply is characterized as being quite responsive to a relatively wide range of prices. However, restrictions of the existing infrastructure impact additional flows, rendering the supply curve very inelastic even when prices are high. On the demand side, overall economic growth, weather and competing fuel prices affect gas ...
The seasonal effect in the residential sector is about twice as great as in the commercial sector. Natural gas deliveries in the residential sector can range from more than 30 Bcf/d in winter months to about 3 Bcf/d in the summer. In the commercial sector, deliveries range from 16 Bcf/d in the winter to 4 Bcf/d in the summer.
The electric power sector is the largest consumer of natural gas, having surpassed the industrial sector in 2009. Consumption of natural gas in the power sector peaks in the summer when demand for electricity is highest. A smaller peak occurs during the winter, while the spring and fall seasons have the lowest consumption of natural gas for electric power.
Natural gas storage levels tend to be highest sometime between the end of October and mid-November and lowest at the end of winter. EIA's Weekly Natural Gas Storage Report shows that most injections occur between April and October and most withdrawals occur between November and March.
Note: Does not include natural gas as a vehicle fuel.
In 2010, the United States used approximately 15 Bcf of natural gas per day to make electricity. By 2016, the amount approached 29 Bcf per day, meaning nearly 41 percent of total U.S. gas production went to electricity generation. In the coming years, natural gas will likely continue to gain market share from older coal facilities.
When methane (aka natural gas) is refrigerated to minus 261 degrees Fahrenheit, it converts to liquid and its volume shrinks to 1/600 th of its gaseous state, making it suitable for shipping in insulated vessels.
The shale revolution led to the development of these four major factors that are now driving demand. As a result, natural gas prices are becoming more volatile. Last year alone, natural gas prices fluctuated 147 percent. When natural gas prices swing, so do power prices.
Demand for natural gas is on the rise, driven by four major developments in the U.S. and international markets: Increasing exports of natural gas to Mexico. Increasing exports of liquefied natural gas (LNG) to Asia, Europe, Central America and South America. Increasing demand among domestic industrial users.