The Natural Gas Industry |
![]() |
![]() |
![]() |
There are a number of uncontrollable factors that affect the price of natural gas in both the short and long term. The unpredictability of the weather and various economic events has
drastically affected the price of natural gas. Weather-The most important factor in determining short-term price movement in North America is the weather, and in particular the effect of temperature on the need for winter heating and summer cooling. Prices tend to follow a seasonal cycle with higher prices in the winter and summer and lower prices in the spring and fall. El Nino and Hurricanes have also shown a significant impact on natural gas prices. If prices at the pump increase, you can expect your natural gas bill to follow suit.
You can also expect natural gas prices to increase with a strengthening US dollar relative to the Canadian dollar. Foreign exchange: The Canadian price of natural gas is derived from the US Nymex price and converted into Canadian dollars. Therefore, a weakening Canadian dollar will increase Canadian gas prices. A strengthening US dollar (compared to Cdn) or a weakening Canadian dollar (compared to US) typically means that Canadians will spend more money on energy. Take the following scenerio for example: assuming the price of natural gas is $8 US/ Mmbtu and the Canadian dollar weakens from $0.84 US to $0.83 US, the Canadian price of natural gas would go from $9.03 Cdn/GJ (8/(0.84 x 1.055056)) to $9.14 Cdn/GJ (8/ (0.83 x 1.055056))* . That’s an increase of approximately $0.11 Cdn due to a penny decrease in the Cdn dollar compared to US. Note that 1.055056 GJ’s is 1 Mmbtu. |