Helping Clients With Their Energy and Environmental Needs


Natural Gas and Oil Market Speculation

By Vorys

From the National Regulatory Research Institute:  "Speculation in itself is not a bad thing.  Good speculation provides a valuable market function.  It helps local gas distribution companies and other large gas consumers, for example, to hedge against rising prices, and so to reduce risk - a significant benefit amid highly volatile gas prices and the current economic situation.  By the same token, good speculation provides natural gas producers with more predictable future revenues, allowing them to expand with less uncertainty and borrowing costs.  That trend, in turn, should help to lower the price of natural gas in the long run.  Any attempt to curtail good speculation, therefore, is likely to make life harder for firms and raise natural gas prices."  A copy of the report can be found here (entitled, Speculation in the Natural Gas Market: What It Is and What It Isn’t; When It’s Good and When It’s Bad).

For the last several years, speculation in the natural gas and oil markets has been blamed for many of the markets' ills.  Without taking a stand either way, this report provides a good overview of the issues.


Tags: Oil, Natural Gas, Speculation, Energy

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