August 22, 2011 

Silent Air Conditioners Bring Energy Prices Down and

Price elasticity of demand can be a beautiful thing. According to the EIA, we are seeing this economic principle in action as a cold wave sweeps the Eastern US. The typical August swelter will be replaced by temperatures more typical of early autumn. According to Bloomberg.com, traders are viewing natural gas as an oversold commodity, but few see any rapid reversal to the downtrend.

Hurricane Irene is not expected to enter the Gulf of Mexico. It is expected to move northward along the eastern coast of Florida and Georgia.

With many economists revising their GDP forecasts for 2011 to 1% or less, we will probably not see a sudden pickup in industrial demand for energy over the next quarter, which will also keep energy prices low.

Natural gas on the CME-NYMEX market reached $3.884 per mmbtu at 9:03 AM; down $0.052. With prices so low, we may experience the unnerving silence of inactive natural gas drilling rigs.

According to Baker-Hughes, there are 900 natural gas rigs in production, which is four more than last week. Compared to last year, there are 85 fewer rigs at work.

Natural Gas Futures Market

CME-NYMEX natural gas futures market intraday prices for August 22, 2011 at 9:45 AM.
(Prices are USD per mmbtu)

Sep. - $3.871 -$0.069
Oct. - $3.872   -$0.069
Nov. - $4.005 -$0.077
Dec. - $4.238 -$0.069
Jan. - $4.345 -$0.067
Feb. - $4.345 -$0.067
Mar. - $4.311 -$0.067

PMC 30-Day Natural Gas Futures Chart

Natural Gas Storage Increases by 50 BCF
Working gas in storage was 2,833 Bcf as of Friday, August 12, 2011, according to EIA estimates. This represents a net increase of 50 Bcf from the previous week. Stocks were 175 Bcf less than last year at this time and 73 Bcf below the 5-year average of 2,906 Bcf.

Electricity Markets Equilibrate

Day Ahead Electric prices in the Northeast have flattened in a channel at the $50 per MWH level. The predicted cooler than normal temperatures will help keep electricity prices low through the rest of August.

Crude Watch

With the Libya intervention reaching its conclusion, crude oil is rallying up $1.50.  Light Sweet Crude (WTI) is trading today on the CME/NYMEX market at $83.76, up $1.50 at 9:45 AM.

 OPEC Basket Data

Interesting Links and Resources

(Click on Links to View)

NY's Smart Grid Gets $45 Million Home  (NYISO)

Ohio Waiting for Drilling Boom (Cleveland Press)

PA. Flywheel Plant Receives Funding  (Bright Energy)

UGI To Make Scranton-Wilkes Barre First All Marcellus Natural Gas Region (Times Tribune)

Why Energy Efficiency Is The Key To Growth

Professor Robert Ayres and Benjamin Warr, America's leading energy economists, recently released their new book, "The Economic Growth Engine: How Energy and Work Drive Material Prosperity". At $225.00 per copy, it will probably not be on the NY Times best seller list. It may be one of the most important economic books of the year.

They argue that energy, or exergy (expendable energy) is at the heart of all national economies. By cleverly applying the first two laws of thermodynamics to how nations extract and use energy to generate GDP, Mr. Ayres debunks modern classical economics.

For Ayres and Warr, the wealth of a nation is not in its currency or in its banks' derivatives or in paper profits, but is manifested in the "real" work that is produced from physical energy. In order to achieve real growth in an economy (positive GDP), a nation must optimize its expendable energy, the driver of all work. Since energy can be neither created nor destroyed, the nation that most effectively recycles or utilizes renewable energy will benefit from organic economic growth.

The beauty of the Ayres-Warr theory is the recognition that you can't have an economic system based on abstractions; it must be based on measurable realities of exergy and output. More than likely, economists will not understand the importance of this book, but most small business people will easily grasp the key idea that work and energy utilization are the keys to profits.

Weather Trends
The 6-10 Day National Weather Service's Forecast indicates cooler weather ahead from the Missouri River to the Atlantic Coast.