canada: February 14, 2008
This has been a great winter not to be locked into a long-term natural gas contract. However, the bargain available now from gas utilities, such as Enbridge, might not last too much longer.
Enbridge is currently charging less than 27 cents for a cubic meter of gas compared with 39.9 cents for the most expensive of the five-year commercial and residential supply contracts available. Canadian RiteRate Energy is charging 33.8 cents for their five-year contract, but is still well above the Enbridge price which is 24.5 cents including its temporary rebate. Unfortunately for the consumer, the rebate may not be the only thing temporary once higher costs are eventually passed along.
Alberta energy companies are now fetching higher gas prices for the one-year heating season to begin next November. The closing price for gas earlier this month was $7.33 per gigajoule or approximately 31.7 cents per cubic meter once associated mark-ups are included.
There seems to be disagreement as to which way gas prices are heading. A government agency is predicting that gas prices will fall in North America over the next several years relative to general inflation rates. Meanwhile, the Conference Board of Canada is forecasting an average annual increase in natural gas prices of 6.7 percent over the next four years.
Natural gas prices have fallen in North America since late 2005 for a variety of reasons including the recovery of supply disruptions caused by hurricanes Katrina and Rita. Other factors have included a build up of gas inventories, the arrival of LNG from Russia and the Middle East, and the recent relatively mild winters and cool summers.
The cheaper prices for natural gas may soon be coming to a close. The cost of extracting gas in North America is going up and energy companies have reacted to falling prices and rising costs by cutting their drilling programs by half this year. They also expect to pay higher royalties to Alberta by 2009 and as such, higher costs will be passed along to the consumer.