The U.S. Energy Information Administration's natural gas storage report released yesterday corrected last week's error that threw gas markets into a tizzy. Storage for the week ending November 19 had been reported down 49 billion cubic feet, and prices skyrocketed. That number was revised yesterday to -17 bcf, a larger draw than I had forecast but well within statistical noise. For the week ending November 26, storage was reported down 5 bcf, somewhat less than my forecast -11 bcf. Prior to yesterday's report, gas markets had begun to reconsider their irrational exuberance on the day before Thanksgiving, and prices trended lower. Following news of the correction, gas prices fell 65 cents/MMBtu, ending the day almost exactly where they started before the pre-Thanksgiving boo-boo. What are we to make of such sudden gyrations in energy prices? Despite ample quantities in storage, current high gas prices reflect legitimate concerns about North American supplies. Tight supplies in global oil markets produce the same effect on world oil prices. With supplies marginal, news of potential minor events is amplified into price swings-one way or the other-as large as 20 percent. Energy price volatility looks to remain a fact of life in the foreseeable future with serious implications for consumers and producers. Already high costs to consumers are increased by the necessity to hedge against volatility. Producers are reluctant to invest when future prices are uncertain. Dr. Rich Ferguson, Research Director, CEERT, rich@ceert.org
