Prices

National Trends

Despite some weather-related spikes, natural gas prices were moderate in 2010, reflecting strength in supply. The 2010 price was well below the 5-year (2005 – 2009) Henry Hub price level of $7.28 per Mcf and much lower than the unusually high 2008 price of $9.13 per Mcf. figure dataIt also represented an 11- percent increase from the unusually low 2009 price, which largely resulted from the economic downturn.

Over the year 2010, the Henry Hub price fell from $6.00 per Mcf in January to $4.38 per Mcf in December (see Figure 3).

While the overall pattern for the year was one of decline, daily price movements were more varied. For some days in January, the Henry Hub spot price spiked above $7.50 per Mcf, the result of high demand during very cold weather. In June, the price rose briefly above $5.00 per Mcf, likely as a response to the forecast of a more active hurricane season.

Regional Trends

Natural gas prices have always varied from one part of the country to another. In 2010, the most important differences from the national average came in the Rockies, where prices were lower than the national average, and in the northeastern Atlantic Coast, where prices were higher.

In the Rockies, the price at the Opal Hub, located in western Wyoming and an indicator of Rocky Mountain prices, was on average about 43 cents per Mcf below the Henry Hub price in 2010, although that difference (the basis¹⁰) has narrowed greatly since the opening of the Rockies Express Pipeline in 2009 (Figure 4). Several years ago, before the opening of the Rockies Express Pipeline, the difference between Opal and the Henry Hub was very wide because infrastructure constraints did not allow for sufficient transportation of gas out of the region. As a result, Opal Hub prices periodically fell to very low levels. In other words, local supply exceeded local demand, creating surpluses that occasionally lead to prices of only a few cents.

In the northeastern Atlantic Coast, prices at Transcontinental Pipeline's (Transco) Zone 6 pricing point for delivery into New York City remained generally close to the Henry Hub prices, except in times of cold weather. Transco Zone 6 New York prices often spike considerably higher than Henry Hub during cold parts of the winter, due to pipeline constraints and bottlenecks going into the Northeastern Atlantic Coast. Prices at Transco Zone 6 New York reached their high for 2010 at $21.00 per Mcf on December 13.¹¹

More information about the dynamics underlying regional prices is available here: http://www.eia.gov/todayinenergy/detail.cfm?id=350

End Use Prices

Prices of natural gas used for industrial and electric power rose 1 percent and 7 percent, respectively, between 2009 and 2010. Commercial and residential prices, however, fell somewhat from 2009 levels. figure dataCommercial and residential prices are often slower to respond to market forces, as local distribution companies often hedge supply, and the regulatory process adds delays in transmitting prices from suppliers to customers.The commercial and residential prices fell from $10.06 and $12.14 per Mcf in 2009 to $9.15 and $11.21 per Mcf, respectively, in 2010. In addition, greater consumption volumes during the winter causes per unit prices for residential natural gas to be lower than they are in the summer months (Figure 5).

 

 

 

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Footnotes