Many observers, of which I am one, believe that North American natural gas supplies are gradually shrinking as resources are depleted. Current gas prices in excess of $6\/MMBtu may be explained by competition for limited supplies, but this explanation is overly simplistic. Last year, gas supplies were ample and the amount of gas in storage increased, but prices remained high. Why? Some analysts whom I respect believe the market is being manipulated to generate artificially high prices. High gas prices make people more ready to accept liquefied natural gas terminals, so perhaps would-be importers are somehow keeping prices high, for example. Perhaps gas traders have discovered how to create the appearance of insufficient supplies simply to profit in the gas market as electricity traders did in California?s ill-fated electricity market. I have no firm data on which to evaluate alleged market manipulation, but last year?s price levels are indeed suspicious. Prices in recent months are justifiably high, however. According to my computer model, supplies relative to demand have dropped dramatically since last September. Currently, gas supplies are less than consumption in a year of average weather by about 2 billion cubic feet per day (700 bcf per year), and the trend continues down. The shortfall is projected to double by the end of March. Unless this trend turns around, serious shortages will materialize next winter. Perhaps both theories are correct. Unlike electricity, gas can be stored, making manipulation of gas markets more difficult. But tight supplies offer more opportunities to drive up prices artificially, as California well knows. It would not surprise me one bit to learn that some natural gas traders are taking unfair advantage of current conditions.