• Price volatility in the natural gas market generally exceeds volatility in markets for other energy as well as other commodity markets. In fact, natural gas is one of the most volatile commodities. As a rare exception, the electricity market has only been trading for two years, and so far, it's price appears to be even more volatile than that of gas.

• A number of characteristics of natural gas market contribute to this volatility.
  - Pipeline capacity can be a constraint under some conditions
  - Consumption of natural gas occurs as a direct flow from the transmission and distribution network. Thus, market supplies must adjust simultaneously to maintain system integrity while changes in deliveries occur.
  - Storage is a key link that supplies as much as 80 percent of supply in some areas on peak demand days.
  - The U.S. market is principally a domestic market, in which about 87% of annual supplies are from domestic production, yet production offers limited flexibility in flow rates

• In contrast, the home heating oil (including propane) markets have some very different characteristics.
  - More supply and distribution system flexibility than with natural gas, so system constraints are easier to overcome with liquids. For example, if a pipeline constraint develops, liquids can move around the constraint by truck, barge, rail car, etc.
  - Heating fuel is stored at more places in the distribution system, resulting in more cushions to absorb supply/demand imbalances.

• Volatility in electricity prices can be caused by a number of factors
  - Electricity markets are segmented and regional in character with the result that a surplus in one region may not be helpful in aiding a region with deficient output.
  - Electric power has no storage equivalent comparable to the inventory management that is typical for other fuels.

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