The prices cited in the volatility figures are for futures trading in near month transactions, as opposed to prices in the spot cash market. Near month futures and spot prices are highly correlated in practice and in theory should be virtually equal.

• Price volatility is the annualized standard deviation of the percentage change between daily closing prices. This definition permits comparisons across different commodities.

• The natural gas market tends to be one of the most volatile markets. It is the significant variation, not the level of prices, that defines a volatile market. The sudden spike in price in December 1995, contributes to the highest volatility of the three heating seasons shown here even though price levels are significantly higher in the 1996/97 heating season.

Slide 4 of 17