If you live in a deregulated state, you have the power to
choose a supplier for your energy needs, including natural gas. But how does
that happen? What is the process for suppliers to sell natural gas and are
there factors that impact how it all plays out?
How is natural gas purchased by suppliers?
Natural gas, much like electricity and other commodities, is
able to be bought, sold and traded on the open market. In deregulated states,
energy suppliers closely monitor energy prices and purchase natural gas for
customers based on current market prices. This gives them the ability to sell
natural gas at a locked in, often lower rate, than the utility.
According to the New York Mercantile Exchange (NYMEX),
natural gas prices tend to be lower in March and April, making spring an
optimal time to consider enrolling in a natural gas plan with a secure and
locked in rate. You can check out price plans in your area here.
What factors affect natural gas prices?
The retail cost of natural gas can vary state to state and
city to city. The factors impacting those variances the most are:
Distance the natural gas must travel
Capacity and availability of transmission
Volume of customer demand
Costs of distribution, taxes and other charges
Number and availability of competing suppliers
Of course, supply and demand play a large part in the price
of all commodities, including natural gas. An increase in supply and/or
decrease in demand will typically result in lower prices while a decrease in
supply and/or increase in demand can induce higher prices.
Similarly, higher prices which are less pleasing than lower rates, will reduce demand and encourage production. Lower prices will discourage production to help reduce the possibility of an overabundance of supply and keep the ratio of supply and demand more balanced.
Factors that affect supply and demand:
We know that supply and demand directly impact the price of
natural gas. But what factors affect supply and demand? Let’s take a look:
Factors affecting supply
Production speed and ability – producing
too much natural gas too quickly, or not enough at not a fast-enough pace will
impact available supply
Amount of natural gas in storage – natural
gas can be stored during periods of low demand, however, if there is not enough
or too much natural gas in storage versus the speed and ability to produce
natural gas, the supply may be too large or not enough
gas imports and exports – supply is impacted by the amount of natural gas
going out or coming in
Factors affecting demand
Status of the growth of the economy –
when the economy is strong, demand for commercial and industrial goods and
services increases resulting in a higher demand for natural gas
extremes in weather – an unusually warm winter or cool summer results in
less demand for natural gas, the same way an excessively cold winter or hot
summer increases demand
of other fuels – when other fuels are short in supply or have increased
prices, the demand for natural gas increases, and likewise if there are an
abundance of other fuels at lower rates, the demand for natural gas decreases
Transmission, distribution and storage
Aside from the commodity itself, transmission and
distribution also play a part in adding to the cost of natural gas.
Transmission and distribution fees are the costs required to move natural gas
from where it is produced or stored to distribution utilities via pipeline, as
well as the cost to deliver it to consumers.
Who supplies my natural gas?
Depending on where you live, your natural gas is supplied by
a utility. In deregulated states, such as Ohio, you have the freedom to shop
around for a supplier, like AEP Energy,
who can give you the most competitive price. The utility will still provide the
same natural gas, reliable service, read your meter, and maintain your lines
without any type of interruption. You are simply able to select from a variety
of price plans which offer secure fixed rates. Check out our website to find a
price plan that’s right for you!
AEP Energy does not guarantee the accuracy, timeliness,
suitability, completeness, freedom from error, or value of any information herein.
The information presented is provided “as is”, “as available”, and for
informational purposes only, speaks only to events or circumstances on or
before the date it is presented, and should not be construed as advice, a
recommendation, or a guarantee of future results. AEP Energy disclaims any and all liabilities
and warranties related hereto, including any obligation to update or correct
the information herein. Summaries and
website links included herein (collectively, “Links”) are not under AEP Energy’s
control and are provided for reference only and not for commercial
purposes. AEP Energy does not endorse or
approve of the Links or related information and does not provide any warranty
of any kind or nature related thereto.
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