U.S. Senator Wants NatGas Price Spikes Investigated – Econ 101
It really is frightening how stupid some of our nation’s leaders really are. They don’t even understand basic economics 101 (they likely never took the class in college). Example: U.S. Sen. Tina Smith from Minnesota (Democrat) who wants federal regulators to investigate the recent spike in natural gas prices, which soared to record levels–into the hundreds of dollars per Mcf. Smith apparently doesn’t understand simple economics and the law of supply and demand.
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Just yesterday we told you about the craziness in natural gas prices in Oklahoma (and elsewhere, like Texas) that happened last Friday, when the cash price for natgas hit $600 in trading at one hub in the Sooner State (see 
Supply and demand, that’s what it’s all about in a pure commodity market like natural gas. Supply and demand just about came off the rails last Friday in Oklahoma as the price of natural gas selling along Oneok Gas Transmission’s (OGT) 23 interstate and 20 intrastate pipeline connections entered the stratosphere. At one point the cash price for natgas in OK was fetching $600/MMBtu! No, this is not a joke. That’s the highest price paid for natgas…ever.
Yesterday we told you that natural gas spot (i.e. cash) prices at various pipeline trading hubs had hit fresh, one-year highs, including here in the Marcellus/Utica (see 
The spot price (cash paid for immediate delivery) of natural gas at trading hubs across the country, including in the Marcellus/Utica, continues to hit new highs not seen in over a year. Even though the longer-range NYMEX futures price isn’t moving all that much. Pay no attention to the futures price! Look at the spot price. In the Henry Hub (Louisiana), the benchmark for all natgas prices, the spot price yesterday closed at $3.83/MMBtu, up $0.48 in one day. Dominion South closed at roughly $3.30/MMBtu, up $0.36 from the day before. And Tennessee Gas Zone 4 Marcellus closed at roughly $3.20/MMBtu, up $0.39 from the day before.
Analysts at S&P Global Platts say that with the current cold snap underway in the northeast, already decreasing natural gas production from the Marcellus/Utica may accelerate with wellhead freeze-offs. Sometimes in colder temps (hey, it was 2 degrees at MDN HQ this morning) water and other liquids in the gas can freeze and block the flow of gas, called a wellhead freeze-off.
Last week MDN told you about a spike in natural gas and electric rates in New York City and New England, thanks to the cold snap and lack of natural gas pipelines into the region (see 
The average price for natural gas at the benchmark Henry Hub in southern Louisiana was $2.05 per million BTUs (MMBtu) in 2020. That’s the lowest average annual price in at least 25 years, maybe longer. The U.S. Energy Information Administration (EIA) says while natgas usage rose in gas-fired electric plants, usage dropped for residential, commercial, and industrial users due to the ongoing pandemic.
David Blackmon is an independent energy analyst/consultant based in Mansfield, TX. Blackmon is a Forbes contributor and has a 39-year career in the oil and gas industry, most of it in public policy and managing regulatory and legislative issues for various companies, including Burlington Resources, Shell, El Paso Corporation, FTI Consulting and LINN Energy. Blackmon has been around the block a few times and understands not only the technical aspects of our industry, but the politics as well. He recently peered into his crystal ball and predicted what lies ahead (i.e. challenges) for the O&G industry in 2021, including a “regulatory onslaught” from Joe Biden…
By now it’s a cliche to say that 2020 has been an exceptional year–and not in a good way. For the first time in our memory of writing MDN, we witnessed widespread curtailments or “shut-ins” of wells in the Marcellus/Utica during 2020. That is, drillers voluntarily turned the values off and flowed less gas in a bid to (a) not sell the gas at prices that don’t return a profit, and (b) drive up the price of gas (see