Friday, February 10, 2012

Falling Nat Gas Prices Offset Higher Gasoline Prices

Detroit News -- "Michigan's Consumers Energy said today that its residential natural gas customers are writing checks to the utility that are down about 20 percent compared to a year ago because of a warmer winter and lower natural gas prices.  The Jackson-based utility with 1.7 million customers said an average residential customer this month will pay about $146 for heat they used in January, compared to about $184 a year ago. Bills for natural gas use in December, paid in January, also were down about $28 for the average residential customer from a year earlier, according to Consumers."

14 Comments:

At 2/10/2012 6:20 PM, Blogger juandos said...

Well I'm not sure how the natural gas price is offsetting the price of gasoline...

Consider the following wee bit of hyperbole from Zer0 Hedge: Why Is Gasoline Consumption Tanking?

Part it is obviously due to somewhat better performance of cars...

From the article: 'Retail gasoline deliveries, already well below 1980 levels, have absolutely fallen off a cliff. Is the plunge inventory-related, i.e. are storage facilities so full that retailers are simply putting off deliveries?

Though I don't have data on hand to support this, I know from one of my correspondents who is in the gasoline distribution/delivery business that gasoline is very much a "just in time" commodity: gas stations are often close to running out of fuel when they get a delivery. Stations aren't holding huge quantities of surplus gasoline; that's not how the business works.

Given the absence of "extra storage" in gas stations (and the fact that the number of gas stations has fallen dramatically since 1980), it is reasonable to conclude that retail delivery is largely a function of demand, i.e. gasoline consumption.

Even if you dismiss the recent plunge as an outlier, the declines in retail gasoline deliveries are mind-boggling. If you look at the data from 1983 to 2011 on the link above, you will note that delivery declines align with recessions
'...

From Trading Economics site (price chart from Jan 2000 to Feb 2012): Natural Gas futures contracts declined 2 dollars or 41.86 percent during the last 12 months. From 1990 until 2012 Natural Gas futures prices averaged 4.09 dollars reaching an historical high of 15.38 dollars in December of 2005 and a record low of 1.05 dollars in January of 1992...

From Gas Buddy price chart for the average price of gasoline for the last six years for both the US and Canada...

 
At 2/10/2012 8:31 PM, Blogger rjs said...

as you said, juandos, better performace of cars, also a cultural change among the young, who now text & play video games instead of cruise the strip & drag race...

rural areas here & states east of ohio dont have the gas infrastructure luxury, & my last fillup of heat oil was nearly $700...

 
At 2/10/2012 8:35 PM, Blogger Benjamin said...

Oil consumption has been falling n Japan and Europe for decades, and now has started a long secular decline in the USA also.

The only event that could revive USA demand is much lower prices. Even then, maybe not, as Congress has passed stricter CAFE standards (I prefer gasoline taxes, but what is, is).

The hope of the oil world is that China and India use a lot more. They may, but then they may mandate other fuels, such as natural gas, or PHEVs.

We may have seen Peak Demand already.

 
At 2/10/2012 9:17 PM, Blogger Hydra said...

Not if you cannot use natural gas.

 
At 2/11/2012 7:29 AM, Blogger Larry G said...

here's the question.

what is the cost of using natural gas to produce electricity at a power plant and distribute the electricity

vs...

having oan on-site natural gas generator that produces electricity??

are home nat gas generators much less efficient than power plant turbines?

 
At 2/11/2012 2:45 PM, Blogger juandos said...

"better performace of cars"....

You know rjs if the author of this piece knows what he's talking about, performance improvements plays a relatively small part in the overall consumption...

Obviously there are small cars today that get great milage in the real world...

When I was in college back in the late sixties and early seventies I drove a '66 four door Ford Fairlane with a big eight in it...

If my memory is still intact the Fairlane's milage (remember that gasoline had a higher octane count back then) was on par with the 15 to 16 miles/gallon I'm now getting with my '02 Astro van...

"cultural change among the young, who now text & play video games instead of cruise the strip & drag race"...

Now that is a very interestng point and a point that if my lifestyle is anything near normal for today falls in line with...

That would've been an interesting facet to attempt to quantify for these gasoline consumption articles...

 
At 2/11/2012 9:02 PM, Blogger Ron H. said...

"are home nat gas generators much less efficient than power plant turbines?"

Yes.

 
At 2/11/2012 9:47 PM, Blogger VangelV said...

...its residential natural gas customers are writing checks to the utility that are down about 20 percent compared to a year ago because of a warmer winter and lower natural gas prices.

Only 20%? Our winter has been very mild and the need for heating has been reduced by quite a bit over last year. I would imagine that most people are using around 20% less gas than they did last year. If the decline in natural gas were passed on why aren't bills significantly lower?

 
At 2/11/2012 9:51 PM, Blogger VangelV said...

as you said, juandos, better performace of cars, also a cultural change among the young, who now text & play video games instead of cruise the strip & drag race...

Sorry but I don't buy the better performance argument. First, if you look at sales you will find that the best performing segment is trucks, not small, efficient vehicles. Second, if you look at the fleet you will find that it is getting older. That means less efficient vehicles are kept around longer.

I believe that the number of miles driven has collapsed because the real economy has contracted beyond what the BLS is reporting. People stay home because they can't afford to go out as much as they did. The nominal figures that are reported show gains but that comes from higher prices that are somehow adjusted away, not a greater volume of food being consumed.

 
At 2/12/2012 12:46 PM, Blogger morganovich said...

seems to me that its falling usage, not prices driving this.

12 month increase in energy prices was 6.6% according to CPI.

http://www.bls.gov/news.release/cpi.nr0.htm

that should include both gasoline and nat gas, etc.

so energy prices are up quite sharply.

you'd need quite a bit less use to offset that.

this is predominantly because of a very warm winter.

i wonder what the bills look like in europe where it has been stunningly cold.

this is precisely the sort of thing that could disrupt their very fragile economy.

 
At 2/12/2012 1:16 PM, Blogger morganovich said...

juandos-

vangel is right about the cars.

5 of the top 10 sellers in the us are pickup trucks and suv's with the ford f series being the leader by a mile.

the average MPG of the US fleet has done pretty much nothing since the 70's.

it was 16.9 in 1991. in 2006, 17.2.

this is not wildly different that the 14mpg in 1923.

you may be mistaking fuel efficiency of a new model year for the fleet as a whole.

no matter the endless attempts by government to up mileage, americans just like big engines and big cars.

trucks are the new muscle cars.

seen the engines they are putting into those things?

you can get an f150 with over 400hp.

that used to be the realm of ferraris.

efficiency is going toward more power and fairly constant mileage.

prius has sold 1mm cars in 12 years.

even at current depressed levels ford f series trucks sell 500k a year, outselling priuses 6:1.

that's why the mileage in the US fleet is going nowhere.

 
At 2/14/2012 10:18 AM, Blogger Hydra said...

Looks like Vange is right:


"Chesapeake Energy Chesapeake Energy announced a plan Monday to raise $2 billion by spinning off assets from its service company and pipeline division, plus another $2 billion from upfront sales of future flows from natural gas fields, and about $6 billion from the sale of its land in the oil-rich Permian basin.

According to a column in Forbes, the plan is a desperate attempt to solve Chesapeake's financial problems. The company isn't generating enough cash because of low natural gas prices, and if prices don't rise, Chesapeake could find itself with a cash shortfall of several billion dollars, the report says."

 
At 2/14/2012 10:31 AM, Blogger Hydra said...

seen the engines they are putting into those things?

you can get an f150 with over 400hp.

===============================

You can get an infinti Hybrid with over 600 HP, what is the point?

I don't think there is any point in saying the car fleet hasn't improeved in economy becasue we are selling more trucks.

I can tell you, my trucks don't go anywhere, unless they have work to do. The mission for my trucks and my hybrid are entirely different.

Americans do like big vehicles and big engines, but they don;t kike $50 fillups.

maybe more trucks are being sold because the unemployed are are starting up service businesses, and existin businesses are finally buying new ones (depreciation schedule?)

Recently I complained to my coworkers that teh cold weather had reduced the mpg on my car. When I told them it was down to 48, they just stared at me.

"tell me about it, I'm only getting 28."


But even 28 is a lot better than 17.

Like everything else, Americans want big cars aqnd big engines, but they want them for free.

Another thing I see happening, is people downsizing their trucks. Whee you used to see an F350 pulling a stock trailier or mini excavator, now it is often a dangerously overloaded f150. Ask the guy at your trailer hitch store if he has seen any horror stories waiting to happen.

 
At 2/14/2012 2:45 PM, Blogger Ron H. said...

"Americans do like big vehicles and big engines, but they don;t kike $50 fillups."

"Like everything else, Americans want big cars aqnd big engines, but they want them for free."

First of all, there is no homogeneous group known as "Americans", who have a single vision of what cars they want, or how much they are willing to pay for gas.

You might want to give people a little more credit for understanding that when they choose a vehicle, it may involve tradeoffs, and that their truck may not get the same mileage they would get with a Prius.

Not everyone has multiple vehicles for multiple purposes like you do, and some people may chose a single vehicle that they consider their best all around choice.

You can't tell them they're wrong, as all value is subjective.

Instead of bragging about your gas mileage, you might explain how buying, insuring, registering, and operating multiple vehicles costs you less overall than a single one, due to one of them getting excellent gas mileage.

"Another thing I see happening, is people downsizing their trucks. Whee you used to see an F350 pulling a stock trailier or mini excavator, now it is often a dangerously overloaded f150. Ask the guy at your trailer hitch store if he has seen any horror stories waiting to happen."

While I too cringe when I see what appears to be a poor match between truck and load, you should be aware that something like "bracket creep" has increase the weight ratings and towing capacities of F150s into a range previously only available in F350s.

 

Post a Comment

Links to this post:

Create a Link

<< Home