UK prices are quoted in therms, us prices are quoted in MMBTU. 1 MMBTU = 10 therms.
1 MMBTU is trading for approx $2.5, 1 UK therm is trading at 143p (circa $1.70), what is driving this nearly 7x difference between UK and US prices?
In: 5
Future pricing is based on market speculation of what the cost might be down the road and locking in pricing now. Futures pricing is based on wars, seasonal/climate projections, market trends, knowledge of what refining plants will go offline for service and upgrades in the next quarter, and number of…well guesses really (usually best guesses by a number of different analysists).
A lot of people are speculating that natural gas prices will rise dramatically in the UK and Western Europe over the next few months to a year, so people are trying to buy stock based on what someone guesses the future price might be.
In the US there is a projection that renewable resources will drive down prices of coal and natural gas in the US over the next 2 years, so the futures market is dropping in the US.
[https://www.eia.gov/todayinenergy/detail.php?id=55239](https://www.eia.gov/todayinenergy/detail.php?id=55239)
Future pricing is based on market speculation of what the cost might be down the road and locking in pricing now. Futures pricing is based on wars, seasonal/climate projections, market trends, knowledge of what refining plants will go offline for service and upgrades in the next quarter, and number of…well guesses really (usually best guesses by a number of different analysists).
A lot of people are speculating that natural gas prices will rise dramatically in the UK and Western Europe over the next few months to a year, so people are trying to buy stock based on what someone guesses the future price might be.
In the US there is a projection that renewable resources will drive down prices of coal and natural gas in the US over the next 2 years, so the futures market is dropping in the US.
[https://www.eia.gov/todayinenergy/detail.php?id=55239](https://www.eia.gov/todayinenergy/detail.php?id=55239)
A lot of factors will go into this, but one is where the gas is produced. The US has a surplus of natural gas. It can produce so much that it could replace Russia as Europe’s supplier if LNG infrastructure is ramped up. The UK on the other hand has to import most of their gas and like most of Europe they were dependent on Russia. They also have little storage space, which means they can’t really stock up on natural gas like Germany can. Russia has made all this worse. Also, a lot of economic forecasts have the UK performing particularly bad the next few years, driving fears of inflation outpacing other countries like the US.
Basically, a combination of very real problems and speculation.
A lot of factors will go into this, but one is where the gas is produced. The US has a surplus of natural gas. It can produce so much that it could replace Russia as Europe’s supplier if LNG infrastructure is ramped up. The UK on the other hand has to import most of their gas and like most of Europe they were dependent on Russia. They also have little storage space, which means they can’t really stock up on natural gas like Germany can. Russia has made all this worse. Also, a lot of economic forecasts have the UK performing particularly bad the next few years, driving fears of inflation outpacing other countries like the US.
Basically, a combination of very real problems and speculation.
It’s easy to transport oil, so the world prices are in lockstep
Transport natural gas requires either a pipeline or LNG tankers and liquefaction infrastructure which is much much more expensive.
So natural gas prices are local/regional.
The US is a net exporter of natural gas.
Europe /UK is importer so the prices reflects what’s needed for some of the import contracts now that cheap Russian gas is off the table
It’s easy to transport oil, so the world prices are in lockstep
Transport natural gas requires either a pipeline or LNG tankers and liquefaction infrastructure which is much much more expensive.
So natural gas prices are local/regional.
The US is a net exporter of natural gas.
Europe /UK is importer so the prices reflects what’s needed for some of the import contracts now that cheap Russian gas is off the table
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