The Dilemma

September 23, 2011

Natural Gas prices continue to be very competitive.

 

However…

 

This has presented a dilemma.

 

 

 

When you request pricing for an existing client,

 

Who has been participating in the deregulated market…

 

 

And

 

 

You compare the proposed price

 

vs

 

What the client has paid over the past 12 months.

 

 

Guess what???

 

 

 

The price normally is higher than what they have paid.

 

 

 

The client’s response normally is:

 

 

Why is it more?

 

 

Why can’t I play less?

 

 

 

That’s a good question,

 

 

 

Now what answer do you
want?

 

 

 

 

Let’s just stick to
the facts

 

 

 

The truth is that the natural gas market is a moving target

 

It is a commodity that is being traded 24/7

 

 

 

 

Several years ago (2008),

 

Natural gas prices shot up

 

 

Market prices were $12 – $14 a decatherm

 

Which translates into $1.20 – $1.40 a therm

 

 

That was the commodity cost to the providers

 

 

 

So consumers were even paying a higher rate

 

 

 

Since that time, prices have steadily dropped

 

 

 

You have probably seen me reference

 

That many analyst saw natural gas pricing

 

Reach a floor in

 

Late October / November 2010.

 

 

Problem is….

 

That nobody knows where the floor is…

 

 

Until you pass it

 

 

 

Well guess what??

 

 

Prices may once again be creating a floor as we speak.

 

 

The Nymex continues to drop

 

It has gone full circle over the last year

 

 

What do you mean the
last year?

 

 

It has gone full circle over the past 2 months

 

 

 

I have a friend, who
is a chiropractor,

 

He asked me what is
wrong with my neck.

 

 

I told him I have been
watching the Nymex!!!

 

 

 

The problem becomes….

 

 

There is more upside risk

 

Then there is downside risk.

 

 

Translated……

 

How much lower can prices go?

 

 

All future indications show prices going up

 

 

 

What are your options:

 

 

 

Float the market while prices continue to remain low

 

 

If you see prices starting to go up

 

You can always turn around and lock your position

 

 

There are various other options…

 

Winter locks…Lock in the price for months with the highest
usage

 

 

Basis locks….Lock in the transportation cost and float the
nymex

 

 

Anyone of these options can be used

 

To be proactive against future price spikes

 

 

 

 

Another issue:

 

 

 

We spoke in the past that natural gas prices

 

Are made up of 2 components

 

Nymex… The cost of natural gas out of the ground in Gulf of
Mexico

Basis…… The cost of transporting the gas from LA to your
local provider

 

Index…….The sum of the 2 or the base cost of the commodity
to the provider

 

 

While the Nymex prices are creating new floor space

 

The basis cost is higher than it should be

 

The result….

 

Adding a low Nymex cost

 

To a higher than normal basis cost

 

Gives you a higher overall cost

 

Then what you were paying over the last year

 

 

 

I find this all very
interesting…

 

(You have to say that
while you are rubbing your chin)

 

 

What should you do?

 

 

HBS presents all the options

 

 

We look at where the market has been

 

 

What are the future projections showing?

 

 

We look to educate our clients

 

So they have a full understanding of how the market works

 

 

We want our clients to feel comfortable

 

 

 

Knowing that they made the best decision

 

For their company

 

When all the facts were presented

 

 

 

To learn more about
deregulated energy opportunities for your business email george@hbsadvantage.com

 

Visit us on the web www.hutchinsonbusinesssolutions.com

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As reported in Drudge Report

Sep 21, 7:41 AM
(ET)

By MARTIN CRUTSINGER

(AP) In this Sept. 30,
2010 file photo, Federal Reserve Chairman Ben Bernanke testifies on…
Full
Image
 


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WASHINGTON (AP) – The Federal Reserve is running out of options to try to
boost a slumping economy and lower unemployment. So policymakers are expected to
reach 50 years back into their playbook for their next move.

Most economists expect the Fed to announce a plan Wednesday to shift money in
its $1.7 trillion portfolio out of short-term securities and into longer-term
holdings.

The plan could lower Treasury yields further. Ultimately, it could reduce
rates on mortgages and other consumer and business loans, too.

Fed Chairman Ben Bernanke is expected to advocate the move despite criticism
from within the Fed and from Republican lawmakers and presidential candidates.

On Monday, the four highest-ranking Republicans in Congress sent Bernanke a
letter cautioning the Fed against taking further steps to lower interest rates.
Their letter suggested that lower rates could escalate the risk of high
inflation.

The plan the Fed is considered most likely to unveil Wednesday has been
dubbed “Operation Twist” and dates to the early 1960s. The Fed used a similar
program then to “twist” long-term rates lower relative to short-term rates.

Expectations that the Fed will do so again, along with renewed fears of
another recession, have led investors to buy up U.S. Treasurys. Treasury yields
have dropped in response.

The yield on the 10-year Treasury note last week touched a historic low of
1.87 percent. On Tuesday, it finished slightly higher, 1.93 percent.

Once the Fed announced last month that it would expand its September meeting
from one to two days, most economists have predicted that policymakers would
unveil some new step. Chairman Ben Bernanke has said that the Fed is considering
a range of options.

The central bank is under pressure to revive an economy that has limped along
for more than two years since the recession officially ended. In the first six
months of this year, the economy grew at an annual rate of just 0.7 percent. In
August, the economy didn’t add any jobs, and consumers didn’t increase their
spending on retail goods.

Most economists foresee growth of less than 2 percent for the entire year.
Many say the odds of another recession are about one in three.

The Fed has offered its own bleak outlook. At its August meeting, it said the
economy will likely struggle for at least two more years. As a result, it said
it planned to keep short-term rates near record lows until mid-2013, as long as
the economy remained weak.

The decision to do so highlighted a rift within the central bank. Three
members dissented from the Fed’s decision – the most negative votes in nearly
two decades. The three, all regional Fed bank presidents, said the Fed’s
policies have increased the risk of inflation.

Bernanke has also faced criticism from congressional Republicans and GOP
presidential candidates. Some have argued that the Fed’s $600 billion
bond-buying program, which ended in June, weakened the value of the dollar
against other currencies and contributed to a spike in oil and commodity prices.

Texas Gov. Rick Perry, who is seeking the GOP nomination for president, went
so far as to say Bernanke would be “almost treasonous” to launch more bond
buying.

Bernanke has said that the Fed could consider another round of bond
purchases. It could also provide more specific guidance on future interest rate
moves.

Or it could reduce the 0.25 percent interest the Fed pays banks on their
reserves at the central bank. Doing so would reduce the banks’ incentive to keep
money at the Fed and might make them more likely to lend.

But many analysts expect the Fed to opt for Operation Twist over those other
actions.

President Barack Obama has unveiled a $447 billion jobs program made up of a
combination of tax cuts and increased government spending. But the proposal
faces an uncertain fate in Congress, where Republicans are focused on efforts to
trim soaring budget deficits.

By  Peter Wallsten, Published: September 8

More than two dozen senators from both parties met privately this week to revive hopes of a grand debt-cutting bargain — exploring how to push the newly formed debt “supercommittee” to find far more than its assigned goal of $1.5 trillion in deficit reductions.

The senators want at least $3 trillion slashed from the deficit over the next decade. In addition, they plan to press the committee to pass a major tax overhaul to lower rates and close special-interest loopholes, as well as changes to entitlement programs such as Medicare, according to several participants.

The effort comes as the 12-member supercommittee begins what is expected to be a grueling process to map out its plans before a November deadline — and it threatens to undercut the chances for President Obama to win passage for portions of a jobs plan expected to cost hundreds of billions of dollars in the short term.

“I don’t think I’m speaking out of school that it was a unanimous feeling among a large group of senators from both sides of the aisle,” said Sen. Bob Corker (R-Tenn.), one of the meeting participants. “Most people are far more focused on this supercommittee than any speech the president’s going to give.”

Another in the group, Sen. Joseph I. Lieberman (I-Conn.), said the senators want to “encourage” the supercommittee “to reach for a higher number.” He said the committee should “compromise with one another and do what parts of each party will not like, for the greater good, because that’s really what most of the people in the country want.”

Obama, too, is expected to press the committee to exceed its deficit-reduction goal. In his speech Thursday night, he called on Congress to increase the super­committee’s deficit-cutting goals to cover the costs of his jobs plan, and he said that a week from Monday he will announce a more detailed plan “that will not only cover the cost of this jobs bill, but stabilize our debt in the long run.”

Several people familiar with the discussions said the lawmakers felt that, after the pomp and ceremony of Obama’s joint-session speech fades, the center of political and policy gravity on Capitol Hill will be the work of the special committee, chaired by Sen. Patty Murray (D-Wash.) and Rep. Jeb Hensarling (R-Tex.).

Under last month’s debt-ceiling deal struck by Obama and GOP lawmakers, deep cuts would automatically take effect in national security and other areas if the supercommittee fails to reach agreement or if Congress fails to pass legislation by December.

One senior Democratic aide called Obama’s jobs plan largely “dead on arrival” because its expected price tag would roughly cancel out the one year’s worth of savings many lawmakers hope the supercommittee will find.

The Senate on Thursday blocked a resolution of disapproval for an additional $500 billion increase in the debt ceiling. The procedure is required by the legislation to raise the borrowing limit in phases by at least $2.1 trillion.

A Senate staffer familiar with the senators’ private discussions said the effort was intended to be “complementary” to the work of the supercommittee but also to offer a gentle nudge.

The staffer said the senators’ push would “demonstrate there can be some support and safety if they choose to go beyond their charge.”

Both aides spoke on the condition of anonymity in order to discuss the private deliberations.

The private gathering this week, held Wednesday in a Capitol meeting room, included about 25 centrists from both parties. It was organized by Sens. Mark R. Warner (D-Va.) and Saxby Chambliss (R-Ga.), two members of the “Gang of Six,” which tried unsuccessfully to engineer a grand deal patterned loosely after the plan laid out by the deficit commission headed by former Clinton White House chief of staff Erskine Bowles and former senator Alan Simpson.

At least a third of the Senate at one time had indicated some level of support for the broad framework being negotiated by the Gang of Six, according to people familiar with that group’s discussions.

By  Associated Press, Published: September 8

WASHINGTON — In an early show of optimism, Republicans and Democrats on a powerful committee charged with cutting deficits pledged Thursday to aim higher than their $1.2 trillion target, work to boost job creation and reassure an anxious nation that Congress can solve big problems.

Tax reform as well as cuts to benefit programs such as Social Security and Medicare will be among the options considered, members of the so-called supercommittee emphasized, although no specific proposals were debated at an opening session than ran scarcely an hour.

While they readily acknowledged numerous obstacles to a deal, committee members said it was essential to try at a time the economy is weak, joblessness is high and the country gives every sign of intense frustration with its elected leaders.

Compromise “is the difference between a divided government that works for the country and a dysfunctional government that doesn’t,” said Rep. Chris Van Hollen, D-Md., the last of a dozen members to speak.

The panel, co-chaired by Rep. Jeb Hensarling, R-Texas, and Sen. Patty Murray, D-Wash., lawmakers from opposite ends of the political spectrum, hopes to help broker a deal somewhere in the middle — on an issue where failure is the rule.

Shortly after the session, at least one Republican member threatened to quit if the panel considers cuts in defense beyond the $350 billion over a decade that Congress approved last month as part of a package of deep spending reductions and an increase in the debt limit.

“I’m off the committee if we’re going to talk about further defense” cuts, Arizona Sen. Jon Kyl said he told panel members. Speaking at a defense forum, Kyl said the military “has given enough already, and any further hit would be inimical to our national security around the globe.”

The committee, three members from each party in each house, faces a deadline of Nov. 23. Its most consequential sessions are expected to take place in closed door sessions that will give President Barack Obama and congressional leaders from both parties the opportunity to influence the outcome.

Ironically, the committee owes its existence to earlier failed attempts at sweeping deficit-cutting compromises, most recently an abortive negotiation between Obama and House Speaker John Boehner, R-Ohio.

Their talks collapsed over the summer, at a time Republicans were demanding deficit cuts in exchange for passage of legislation to raise the debt limit and prevent a first-ever government default.

In the end, the two sides agreed to increase the debt limit by enough to let the Treasury pay its bills through 2012 while also cutting $1 trillion over a decade from one category of government programs.

It was a significant sum, but far less than the White House and some Republicans had been hoping for. Nor did it change the tax code or significantly affect Medicare, Medicaid, Social Security, farm programs and other costly benefit programs than many lawmakers say must be part of any attempt to slow and ultimately reduce the nation’s debt.

That is particularly true of Republicans, although Democrats are largely unwilling to go along unless their GOP counterparts will agree to higher revenues at the same time.

“I approach our task with a profound sense of urgency, high hopes, and realistic expectations,” Hensarling said as he gaveled the session to order. He said the task “will not be easy, but it is essential,” and said the panel “must be primarily about saving and reforming social safety net programs that are not only failing many beneficiaries but going broke at the same time.”

A fellow Republican, Sen. Pat Toomey of Pennsylvania, added another item to the agenda moments later, speaking of “wasteful tax subsidies” that should be eliminated and calling for changes that can turn the tax code into an engine for more economic growth.

“When huge, iconic American corporations can pay little or no income tax, well that’s indefensible,” he said. “So I think we ought to wipe out those special interest favors, have commensurately lower rates, encourage the economic growth that will generate more revenues, generate more jobs.”

Among Democrats, Murray stressed the importance of compromise, saying that in meetings with constituents last month, they “asked why it was that every time they turn on their televisions, they hear about more political battling, more partisan rancor_but nothing more being done for people like them.”

She added pointedly that she was pleased that other members of the panel “have refrained from drawing in the sand or carving out areas that can’t be touched” as part of any deal.

The committee is scheduled to hold a public hearing next week at which Douglas Elmendorf, head of the nonpartisan Congressional Budget Office, is expected to explain the forces that have driven the annual deficits into the $1 trillion-plus range, and left the country with a debt of $14 trillion.

The legislation that created the committee also approved a $400 billion debt limit increase, and permitted Obama to request yet another $500 billion increase, with an option for Congress to block it. An attempt to do so failed in the Senate on Thursday evening.

If the committee fails to produce a 10-year package of cuts of at least $1.2 trillion, across-the-board spending cuts would take place that would and simultaneously allow the president to seek another increase in the federal debt limit of the same size.

On the other hand, any agreement on cuts totaling up to $1.5 trillion that are approved by both houses of Congress would permit Obama to request a dollar-for-dollar rise in the debt limit. There is no upper limit to the amount of deficit reductions the panel can recommend.

The committee proceedings were briefly interrupted by demonstrators who shouted “Jobs Now!” in a hallway outside the room. The group dispersed after police threatened them with arrest.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed