<i>Editors? note: Opinions expressed in this column are those of the author. This publication takes no responsibility for their accuracy.</i> Natural gas prices continue to hover around $7.00/MMBtu?well above the cost of production. Consumer advocates suspect that gas prices have been artificially inflated by producers that are withholding supplies. California has had experience with such alleged skullduggery in its electricity market experiment, and evidence may emerge showing similar strategies at work in today?s gas markets. There are, however, less conspiratorial explanations for current prices. When access to supplies is unconstrained and competition robust, prices cannot rise much above the marginal cost of production, currently estimated to be about $3.50/MMBtu. This is a buyers? market in which prices are low and stable. Gas price forecasts by the Energy Information Administration and the California Energy Commission assume that such a market exists. Unfortunately for consumers, this assumption is false and has been for several years. North American natural gas supplies are limited, and production is falling despite record drilling activity. Buyers are willing to pay higher prices in order to ensure adequate supplies. We now have a sellers? market in which prices rise above the cost of production. Further increases are limited only by buyers? willingness to pay and the cost of competing fuels. Crude oil is now a high-priced alternative, trading above $9.00/MMBtu ($50/barrel). Utilities, the largest buyers of natural gas, routinely recover their fuel costs in rates and are relatively insensitive to prices. Regulators are more worried about shortages than prices. With most buyers willing to pay, there is little to prevent natural gas prices from approaching the price of oil. In my opinion, it is Mother Nature that is withholding gas supplies and creating the sellers? market, not malevolent producers. In either case, it will take huge investments in conservation, renewable resources, Alaskan pipelines, and/or LNG to restore a buyers? market for natural gas. It won?t happen anytime soon. In the meantime, crude oil continued its spectacular climb this week, pausing only one day for profit taking before reports of a broken pipeline in Mexico, continued strife in Nigeria, and politics in Russia sent it higher again. U.S. petroleum inventories were reported sharply lower, and crude for November delivery closed yesterday on the NYMEX at a record $54.76/bbl, up $1.12 on the day. Natural gas prices changed little yesterday in the wake of an uneventful storage report from USEIA, closing at $6.80/MMBtu. As of October 8, working gas in storage was 3,159 bcf, comfortably over the 3 trillion cubic foot level considered adequate for the winter ahead. Heating loads are beginning to increase in the East and Midwest, reducing additions to storage. I estimate that another 120 bcf will be added during October. When withdrawals begin in November, we should have about 3,300 bcf in storage, or 8 percent more than the historical average. Considering the ample storage numbers, today?s prices are indeed remarkable. Small wonder consumers suspect foul play.