Lock in a price for natural gas this winter?

[secretlyironic.livejournal.com]

Normally, I wouldn't. But the Farmer's Almanac and Accuweather say that it will probably be colder and snowier than usual, which would increase demand, which would raise prices... So I figured I'd ask DSLJ.

Do you think the price of natural gas is going to rise this winter? Are you opting for the NSTAR fixed winter rate of $0.7903 per therm?

Comments

[chenoameg.livejournal.com]

Last time I checked the federal estimates for the price of natural gas this winter it estimated a drop. That was a few months ago, though, and I don't have the link handy.

[m00n.livejournal.com]

I'm no energy analyst, but if the DoE's forecast charts (http://www.eia.doe.gov/emeu/steo/pub/nov09_charts.pdf) are any indication, the price will be steady or continuing to decline throughout the winter.

Additionally, a lot of people seem to think that the price of energy will directly track the recovery of the economy, and I haven't heard many forecasts predicting that happening before about this time next year.

For what it's worth, I don't plan on locking it in. Energy prices tend to spike in the summer anyway, so I tend not to think this is usually a very good deal for people who are mainly using the fuel to heat their homes.

[mattdm.livejournal.com]

NSTAR also buys gas on the futures market, so the prices are already hedged.

I got the same offer.

[nvidia99999.livejournal.com]

My (probably flawed) reasoning: NSTAR would not offer this rate if they thought it would be bad for them, especially in this environment where there isn't much competition (if at all). If it's good for them, it's bad for me. Of course, they could be off in their bet, but I assume the information they used is better than any prediction I could come up with, given the resources they can use to develop predictive models and whatnot. Therefore, given the limited information I have, it makes sense for me not to take their offer.

[alphacygni]

I see it as an insurance offer. If a spike in costs would seriously harm your finances (presumably because you are running that close to the edge), then you can do this. Otherwise, I see no reason to do it. I don't think anyone could really predict accurately enough to come out ahead doing the locked price (or not) over time.

I think last year...

[nvidia99999.livejournal.com]

Those who locked in on a similar offer lost money... Obviously, it could be different this year. Nonetheless, they are not going to pick a rate out of generosity...

[girlgonemad.livejournal.com]

Does anyone have the supply charge numbers from last year that weren't locked in for comparison? The lock in rate was $1.2624/ therm from Nov. 1 - April 30.

[coeceo.livejournal.com]

In other fuels (ie. propane and heating oil) the typical process is to offer the price, then purchase the fuel in advance, in effect guaranteeing at least 80-90% of the price capped fuel, based on usage estimates and of course governed by specific state regs.

Not sure if natural gas providers must do the same, id assume so. This means its a one time purchase/profit for the provider, they dont get more profit if the price drops, or less if it increases as most of the fuel has already been paid for at the current rate when the promotion was offered.

This was an issue last winter, when fear of the $4-$5/gallon heating oil prices were still fresh in peoples minds from the previous summer months. Many locked in around $4 thinking it would rise again, but it actually dropped. now these people were stuck paying $4 when neighbors were closer to $2.50. Many people ignored their agreements and bought fuel out of their contract, thus screwing their oil companies who already purchased fuel at the price when the promotion was offered (usually around 10 cents under the consumers price).

When you agree to buy at a set price, so does your fuel provider.