U.S. Energy Information Administration
U.S. Energy Information Administration

On February 26, the EIA published a report about the high temperatures and demand in the Midwest. There were record-breaking cold temperatures and natural gas demand during the 2019 polar vortex. This most recent polar vortex was colder than both the 2014 polar vortex and the bomb cyclone of 2018.

Despite the record-breaking cold temperatures, the pricing effect was muted. As you can see in the charts, numbers were behind the 5 year average in storage and natural gas demand was at a record high. Begging the question:

If demand was at an all-time high and weather was record setting, why didn’t prices behave as they have previously in the Midwest?

Well, the answer is pretty straight-forward: prices are made by the interaction of demand AND supply. The supply picture in the Midwest is very different now, in 2019, than it was in 2014, and even in 2018.

Significantly more gas is being produced in the Utica and Marcellus shales currently than it has been in recent years. The Utica and Marcellus shales are in close proximity to the Midwest, so resources can easily be dispatched to these areas to meet increased demand. More important than the proximity of the resource, is the transmission capacity, or ground pipe, to deliver this gas to the load.

There have been many projects to bring the unprecedented gas resource from the well head in the Marcellus and Utica Basins to market in the Midwest. Which poses an interesting question:

Will this pipeline expansion continue to other markets which desperately need the gas to lower emissions from coal and fuel oil as well as power efficient electricity generation?

Author:
As Vice President, Operations at Reliable Power Alternatives Corporation, Mark is responsible for the leadership and management of the RPAC analyst team, as well as the development and execution of all procurement strategies. Mr. Kleinginna has innovated in wholesale and retail energy markets throughout the United States and Canada for the last 25 years.

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