www.fueloilnews.com | FUEL OIL NEWS | SEPTEMBER 2014 15
ral gas prices in the spot market will gen-
erally rise as temperatures move further
away from 60 degrees, as more natural
gas is needed for space heating as tem-
peratures cool and for power generation
as temperatures warm.
However, this relationship takes
different forms at various locations
throughout the United States. The
impact of extreme cold is particularly
large, reflecting high usage for heat-
ing combined with infrastructure con-
straints in some markets.
In the Northeast, prices are particu-
larly sensitive to temperature variations,
rising by more than other regions as
temperatures cool and high demand
exacerbates pipeline constraints, as well
as when temperatures warm and rising
natural gas demand from electric gen-
erators can strain pipelines. Conversely,
during more temperate days in the
spring and fall, when pipeline capac-
ity is generally sufficient to meet lower
demand, the proximity of northeastern
hubs to increasing Marcellus Region
production results in prices that are
lower than those in other parts of the
United States.
• During cold winter months, aver-
age temperatures in the Northeast can
drop below 20 degrees Fahrenheit, as
occurred in January 2014.
• On these days, natural gas spot pric-
es reached record levels, rising to more
than $75 per million British thermal
units (MMBtu) at Algonquin Citygate,
$90/MMBtu at Tetco-M3, and $120/
MMBtu at Transco Zone 6-New York.
• In 2009, 52% of households in
the Northeast U.S. Census Region used
natural gas-fired heaters as their main
home heating equipment. This share
was below the percentage of house-
holds relying primarily on natural gas-
fired equipment for home heating in the
Midwest (69%) and West (55%).
• However, northeastern cities differ
from cities in the Midwest and West in
that, on days of high demand from resi-
dential and commercial consumers that
rely on firm capacity from local distribu-
tion companies, the amount of capacity
available to spot market consumers—
largely electric generators—becomes
strained, causing much more significant
price spikes.
• The Northeast is also relatively more
reliant on natural gas-fired generation
than the West or Midwest. In 2013, gas-
fired electricity generation accounted
for 33% of net power sector generation
in the Northeast, versus 8% in the
Midwest and 29% in the West.
