Managing Natural Gas Price Volatility: Principles and Practices Across the Industry
Prepared for the American Clean Skies Foundation
The volatility in natural gas prices over the course of the past 10 years has resulted in an increased emphasis on risk management activities by industry participants. Several major price spikes occurred during the decade, and a general tightening of the supply-demand balance in U.S. gas markets resulted in higher natural gas prices and higher price volatility for U.S. gas consumers relative to the experience of the 1990s. Some have suggested that speculation also contributed to high price levels and volatility – though there is no general agreement on this view.Since natural gas is also the marginal or price-setting fuel in electricity markets in many regions of the country, the volatility in natural gas prices over the past decade also had a pronounced impact on retail electricity prices, and probably vice versa as well, since natural gasfired generation has been the predominant source of increased gas demand over the past 15 years.
