This graph above, courtesy of CNN, shows the three month upward trend in the cost of natural gas in the United States. One of the country’s largest natural gas facilities in the Southern United States saw prices spike from $1.85 per million British thermal units to $3.14/MBTU. That is a 70% jump in cost in just three months! What’s causing this extreme movement in the price of this fossil fuel?
Analysts are pointing to the elevated summertime temperatures prompting more and more people to turn on their air conditioning units to beat the heat. Couple this heightened cooling demand with decreasing production in natural gas and it becomes apparent that natural gas is just as volatile of a commodity as oil. As natural gas prices fell to meet the cost of electricity, exhibiting a 10 year all-time low, utilities switched to using natural gas to fire power plants and oil companies then directed their attention to extracting more profitable oil. So the natural gas reserves dwindled and the commodity traders pushed the price higher and higher. On Tuesday natural gas was trading at a seven month high.
Will the price of natural gas continue to rise or will the price come back down as summertime temperatures abate with the coming winter? Either scenario could play out. What this situation further demonstrates is that fossil fuels are merely market driven commodities. Renewable energy, on the other hand, is far less susceptible to the energy markets. After all, the sun is providing us constant, free energy. Once you make a capital investment in photovoltaics, solar thermal, geothermal heat pumps or wind turbines you are buffering yourself from high market volatility of fossil fuels. In fact, as fossil fuel prices increase your investment becomes more lucrative and your return on investment becomes shorter.
If you are on the fence about investing in renewable energy systems think about these few factors before opting out. 1. The Federal government is offering 30% tax credits through 2016. It would seem logical that they continue the program after 2016, but we can’t be certain. 2. Fossil fuel markets are volatile and unpredictable. The price of fossil fuels has been on a roller coaster ride in the last ten years. It is likely prices will continue to creep upwards. 3. Returns on your renewable investment can be as high as 20% depending on the system type and design. The financial return on renewables is more reliable than the stock market or hedge funds. Renewable energy systems are a risk-free, long-term investment, especially considering the recent spike in what everybody thought was a stable value of natural gas.










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