These two graphs (from WTRG.com) explain it to some extent: oil prices have remained high, but flat, and gas prices has tumbled down from their December highs.
Well, it seems the US dodged a bullet this winter. As I wrote in various episodes (including item 15 below), the natural gas situation was very tense and depended, to some extent, on the weather. Thankfully for you guys, the winter has been a lot milder than expected, in general, and consequently, heating and electricity needs have been lower than feared, and gas was available in sufficient volumes to avoid any shortages and the accompanying price spikes.
Before I turn to the UK, which was facing the same risks, and which is facing a much harsher winter, do note that today's apparently "low" prices for natural gas are still two-three times more expensive than only a couple of years ago, and, more to the point, twice as expensive as the high range of expectations for power producers when they built they gas-fired plants, as this graph for UK gas prices, from a 2004 analysis of electricity costs prepared by the Royal Academy of Engineers, shows:
(multiply by about 1.5 to have comparable prices in $/mbtu for gas)
That means that wholesale electricity prices (determined to a large extent by gas prices, as the marginal producer) are still much higher than they used to be, and these higher prices are now seeping through into utility bills, as a number of you have probably noticed.
So, what happens when winter is harsh?
Gas warning: not enough to meet demand (Guardian)
Cold weather provokes supply crisis
Gas supplies could be under threat
The National Grid, responsible for running Britain's gas and electricity pipes and wires, yesterday issued an unprecedented warning that the country was in danger of not having enough gas to meet demand.
It issued its first-ever "gas balancing alert" to the market, telling traders that gas demand might have to be reduced, initially for businesses. The move sent wholesale prices spiralling up fourfold.
UK gas prices hit record again (Financial Times, this morning)
UK gas prices hit record levels on Tuesday for the second successive day as cold weather and the temporary closure of the country's largest gas storage facility tightened supply, but prices later eased as the National Grid, the operator of the UK gas network, said it would not repeat Monday's warning about tight supplies.
Traders said wholesale prices for gas delivered within the day were quoted at 255p per therm, level with the previous day's peak. This represents the highest price since the UK gas market was deregulated in the early 1990s. The day within price later dropped to around 200p.
To convert that into $/MBTU as used in the US, that means that prices reached almost 40$/MBTU for the second day running - or close to 230$/boe (barrel of oil equivalent).
All it took was a snap of cold weather, in a context when a major storage facility has been damaged temporarily by a fire.
Traders said cold weather on the continent has slowed gas imports through the Interconnector gas pipeline connecting the UK and European gas networks. Although Interconnector gas flows increased marginally from 40 per cent to 52 per cent on Monday, this was seen as a minimal response to exceptionally high UK prices.
In comparison, Dutch gas prices were about 150p/th lower than the equivalent UK price.
This blatant attempt to blame the evil (continental) Europeans for the nasty price increases is already going on at full blast. It cannot be market liberalisation, because markets always bring prices down, right? So it must be the selfish protectionist Europeans.
Cold snap takes gas price to record high (Financial Times again, another article form this night)
The steep rise in UK wholesale gas prices over the past two years, reflecting higher oil prices and declining gas production from North Sea fields, is hitting consumers. All six of the UK's large energy suppliers, including British Gas and Powergen, have recently announced double-digit gas and electricity bill increases.
Whether yesterday's surge prompts further bill increases will depend on how long the rise in market prices lasts.
Because of higher demand for gas over the past few days, the amount of gas available in the UK has shrunk to just 10 days' worth of national requirements, according to traders.
Centrica, owner of British Gas and the Rough storage facility, blamed the inefficiency of the European gas market for the surge in prices. Gas in the Dutch market was trading at 116p a therm but was not being sold into the UK market despite the higher prices.
Stoopid foreigners who won't take advantage of higher prices (and would rather heat their own consumers than sell to the market friendly ones in the UK). Evil, evil evil.
No, the declining gas production, and the lack of anticipation by the markets of what has long been announced cannot be blamed, because markets are always right.
They built all the gas-fired plants in the US and the UK because thye were cheaper and easier to finance, and gas was plentiful. Right? Right?
Earlier "Countdown Diaries":
Countdown to 100$ oil (21bis) - long term vs short term worries
Countdown to 100$ oil (21) - 8-page extravaganza in the Independent: 'we're doomed'
Countdown to 100$ oil (20) - Meteor Blades is Da Man in 2005
Countdown to 100$ oil (19) - Your bets for 2006
Countdown to 100$ oil (18) - OPEC happy with oil above 50$
Countdown to 100$ oil (17) - Does it matter politically? A naked appeal for your support
Countdown to 100$ oil (16) - We'll know on Monday
Countdown to 100$ oil (15) - the impact on your electricity bill
Countdown to 100$ oil (14) - Greenspan acknoweldges peak oil
Countdown to 100$ oil (13) - Katrina strikes / refinery crisis
Countdown to 100$ oil (12) - Al-Qaeda, oil and Asian financial centers
Countdown to 100$ oil (11) - it's Greenspan's fault!
Countdown to 100$ oil (10) - Simmons says 300$ soon - and more
Countdown to 100$ oil (9) - I am taking bets
Countdown to 100$ oil (8) - just raw data
Countdown to 100$ oil (7) - a smart solution: the bike
Countdown to 100$ oil (6) - and the loser is ... Africa
Countdown to 100$ oil (5) - OPEC inexorably raises floor price
Countdown to 100$ oil (4) - WSJ wingnuts vs China
Countdown to 100$ oil (3) - industry is beginning to suffer
Countdown to 100$ oil (2) - the views of the elites on peak oil
Countdown to 100$ oil (1)