By Cody Haluzak
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The start of 2014 began with freezing weather. The majority of the United States has suffered from this chilling weather for the past week and days to come. The temperature has reached a record breaking number of around -30 degrees Fahrenheit. With these temperatures comes a demand in heat. The majority of homes are heated with Natural Gas. The regular price of gas in winter is around the high teens or low $20s per million British thermal units. On Monday January, 6 2014 a contract in New York reached $99 per million British thermal units. The companies that buy natural gas buy it in advance to minimize the amount of gas they have to buy at these elevated prices.
What is happening here is that the producers of natural gas increased their prices based on how the weather was turning out. The companies that supply the gas had to then purchase the gas at the insane prices which then led to the homeowners paying though the roof just to heat their homes. Many people believe this should be illegal because having heat is an essential for our homes. Even though according to the National Public Radio the production of natural gas is “going through the roof”, they still will continue to raise the price whenever there is a demand. That is how money is earned. It happens where ever you go. Every company will raise their prices when the demand kicks in. A new trend in clothing comes into the market and the sales rise. The demand then hits its peak, the prices rise with it. That is how companies make their money.
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In my opinion this should be illegal, at least for household essentials. If a new trend in clothing hits a high in demand then it should be ok to raise the prices, because after a while people will find cheaper ways to counter act the rising prices and the prices will drop back down. But to do this with an essential of life is not going to fly with many citizens.
Video:
http://www.krcrtv.com/news/local/low-northstate-temperatures-break-natural-gas-usage-records/-/14322302/23426460/-/mc3n29/-/index.html
Bui, Quoctrung. "U.S. Is The World's Largest Producer Of Natural Gas. Here's What That Means." NPR.
NPR, n.d. Web. 7 Jan. 2014. <http://www.npr.org/blogs/money/2013/10/10/231475085/the-u-s-is-the-worlds-biggest-producer-of-natural-gas-heres-what-that-means>.
Hargreaves, Steve. "Natural gas prices surge on cold snap." CNNMoney. Cable News Network, 7 Jan. 2014. Web. 7 Jan. 2014. <http://money.cnn.com/2014/01/07/news/economy/natural-gas-prices/index.html?iid=SF_E_Lead>.
"Low Northstate temperatures break natural gas usage records." KRCRTV. N.p., n.d. Web. 7 Jan. 2014.
<http://www.krcrtv.com/news/local/low-northstate-temperatures-break-natural-gas-usage-records/-/14322302/23426460/-/mc3n29/-/index.html>.
McGrath, Maggie. "Freezing Temperatures Raise Natural Gas Prices But Markets Are Eyeing A Thaw."
Forbes. Forbes Magazine, 7 Jan. 2014. Web. 7 Jan. 2014. <http://www.forbes.com/sites/maggiemcgrath/2014/01/07/freezing-temperatures-raise-natural-gas-prices-but-markets-are-eyeing-a-thaw/>.
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ReplyDeleteCody,
ReplyDeleteIn light of the current freezing temperatures, natural gas is certainly a "hot" topic! Regarding the $99/MBTU contract you spoke of in your post, you'll be glad to know that consumers in that area (NY) should not see any increase in their bills thanks to hedging by the firms that supply the natural gas to consumers. Natural gas suppliers typically buy long term contracts that protect consumers from such short term price spikes.
Thank you!
Mr. Batterman
Thanks for the information. I was unaware that the consumers prices were protected and that they did not need to pay the increased price. I will look into my research more to prevent mistakes like this from happening again.
DeleteI agree that something has to be done to control the increase in natural gas prices. This is a different situation than most supply and demand situations because everyone, especially in the winter time, need to heat there homes. There should be a price floor put on natural gasses to ensure that individual households are able to afford to heat there homes throughout the year.
ReplyDeleteLike Collin and yourself I agree that actions have to be taken to control this concerning issue. It's evident that supply and demand is how business's make their biggest profits and something they have to do to be successful. However it's not ethical, and if they continue these unethical actions, I feel as if it will only have a domino affect on the rest of society, and chaos will occur.
ReplyDeleteI tend to agree with your argument. The weather conditions outside should not have an affect on the heating companies, and how they increase their prices. During an essential time for heat I can see how the idea would come up, but it seems wrong to raise the prices when we know the economy is bad and heat was an essential thing.
ReplyDeleteI agree, it shouldn't be allowed to raise prices on something so essential for people. Gas is necessary for people to heat their homes, and with prices rising so drastically, people cannot afford to spend this much. Their should be a price cap for oil, which would help everybody benefit, instead of just the huge companies. The demand is to high for the oil, so the companies are raising prices to meet this demand, but it has gone to an extreme level, and something needs to be done to control these prices.
ReplyDeleteI think that it's unfair to the people that need the heat to raise the prices as soon as temperatures drop, but at the same time people should make sure there fuel tanks are full before the harsh weather comes. This article just makes me glad we burn wood to heat my house and don't pay a penny for gas!
ReplyDeleteWhile the high price of gas does irritate me and homeowners everywhere, I don't believe government should step in to control price. As we have seen, government control usually leads to deadweight loss and an inefficient market model. The reason prices are skyrocketing is that consumers are willing to pay extra for the gas. It makes sense that during a cold season, power companies make extra money. I think the real question here is, what will happen in 100 years when the earth runs out of natural gas? Will we be able to find natural substitutes to heat our home, will we have to develop new technology to heat our homes without gas, or will we all freeze to death? The jury is still out.
ReplyDeleteI understand why you and other may be for making these price hikes illegal, but i believe that they are in the green and nothing should be done. these companies are taking advantage of something people cannot control, wouldn't everyone? no one is forcing you to heat your home with gas, or even to heat your home at all. there are plenty of alternative fuels to heat your home with. if you are unable to use alternative fuels and cannot pay the heating bill, well, LIFE'S TOUGH. deal with it, use blankets, wear a coat, use a heated blanket, i don't know, but what i do know is that you being cold isn't the electric companies problem, and making it there problem isn't the American way.
ReplyDeleteI get the thinking of this being illegal, but also, having heat is a privilege, not a right. It's not like heating comes with the purchase of a house. Maybe in apartment building it could be a different situation, but in average households, it shouldn't be illegal. It's not exactly fair, but not much is. Increasing prices is the only way for the companies that purchase the gas to make money, and this is a basic rule of economics--demand increases, so can price. This is how they keep their business running and profitable with this price increase, and if they kept their prices the same, eventually they'd fail and it would lead to other drastic changes in the economy.
ReplyDeleteAlthough it may be the case that natural gas companies are rising their prices because they know they can due to the current high demand, I believe that with the major increase in use of natural gas may have caused supply to decrease requiring a rise in prices so that the entire supply does not run out when the need is so high. This theory makes sense because depleting resources will have to lead to higher prices, just as we see with the gas prices. The prices went up not because the demand increased, but because the resource is running out and a higher price will reduce demand ultimately reserving some of the resource for longer. Therefore, I believe the price increase is due to decreasing supply not increasing demand.
ReplyDeleteI think that it would be wrong to make this illegal. Because every company has to have some way of making a profit and if that means that every once they increase the prices due to increased demand then so be it. They should do it, because not only is it beneficial to them as a company, but it also opens the possibility for increased bonuses and raises available for potential employees.
ReplyDeleteWhat I found to be really interesting about this topic is the whole reason why natural gas prices are ultimately rising. Usually when a product or a desire or need from consumers is increasing in the market the demand will naturally go up. In this case the demand is not the overall reason why the prices are essentially rising in this case. The reason why they are increasing in price is because of scarce resources they have left. This may appear to be a little intimidating to consumers when they notice the price of natural gas go up because it is definitely an essential good. This doesn't mean their is a high demand, but without it several consumers may go--well--go crazy lets say. In order to fix this situation I feel like the companies providing the natural gas need to find another source that will have the capabilites of expanding their resources. If they generate a surplus they will be able to lower back down the prices because they will be able to not only make a bigger profit, but provide consumers with a realistic price. Overall, very interesting topic!
ReplyDeleteIt may seem unfair that natural gas companies are rising their prices, but it is actually reasonable because supply and demand of this commodity. Simply because the fact that people won't stop buying natural gas or finding another alternative, since most areas only have one company supplying natural gas. Just like gas, the price will go up but everyone will eventually adjust to the change.
ReplyDeleteIt is understandable that the prices are rising up becasue of the demand for warmth in the house holds. Though yes it is unfair that the companies are raising their prices during the harsh times but that means the people are likely to spend that money to keep themselves warm. As time will go on the price will go down and then it will stablize.
ReplyDeleteI understand why companies are raising prices as the demand increases but I also see where you’re coming from. It shouldn't ever get to a price where people cannot afford it at all, putting their life in danger in extremely cold weather. I also really liked your point on how it is more ethical to raise the price on a new fashion trend because it is a want not a need.
ReplyDeleteI have to agree with Nolan, but I understand why you think the increase in prices should be illegal. Many companies, especially gas companies see this as a period of growth. What many companies have been doing for years is the comparison of supply and demand. While natural gas is not a renewable resource, I can see why the prices would be so high at times when it is desperately needed in homes around North America. A sudden dip in temperatures will in turn give a sudden increase in demand which the various oil companies can profit from. Anyway, I think you did a great job in your post informing us what was going on the other side.
ReplyDeleteNot only are the gas prices rising due to the diminishing supply of resources, but also because of the extreme cold weathers currently around the nation. It is costing companies more money to store this gas because the cold air speeds up condensation and some of the gas evaporates. People are also using more gas to heat their homes and cars, which requires them to purchase more and companies use that to their advantage.
ReplyDeleteI believe that the rise in natural gas will turn out to be a good thing. Even though people have to pay more, scientist are going to have to find alternative energy sources that will heat our homes. People were using there natural gas to heat there home while I was using wood and a fire place, so we could keep our natural gas usage low. People are going to have to find other ways to heat there home or turn down the temperature in there home.
ReplyDeleteWith the recent extreme drop in temperature, people have had to turn up the heat in their homes to stay warm. With so many people doing this, the gas companies were able to raise their prices because people need to have heat. I agree that people should not have to pay so much because they should never be worried that they will be unable to afford the expensive heating bill and then go without heat. This is a very popular problem here in Wisconsin and especially after the recent cold snap we have experienced.
ReplyDeleteSomething that will always be needed is gas, especially in the winter time. We worry about our gas tanks freezing and keeping our cars above half of a tank and when inside our homes wanting to live in a comfortable temperature so turning the heat on using gas as well prices are rising because the usage of this resource is also increasing. If they keep rising prices then yes people are going to not be able to afford this but they will not let people freeze this could cause to many issues. I agree they shouldn't make people feel like they will not be able to afford it.
ReplyDeleteI completely agree that this should be a regulated industry. Let the gas companies make their profits, but not at the cost of American homeowners safety. It is simply not ethical to take advantage of people who need to heat there homes because of the cold.
ReplyDeleteI also agree Cody. Anything considered a necessity for survival (shelter in this case) shouldn't be subject to the rises and falls in demand. If gas companies took more care in projecting numbers of expected consumption, a supply could have been established beforehand to negate the demand from the cold weather.
ReplyDeleteI am not surprised of the amount of gas that was used, especially in the past few extreme cold days. I agree with you when you say that the prices shouldnt be raised, because what happens when people cant afford it? This could lead to even worse problems! The bottom line is, gas is essentially necessary for survival! Until we find better, more efficient ways of creating heat, gas should remain the way it has been. But I do understand where others are coming from when they say how we have to base prices on supply and demand, but this shouldnt be done for essential items.
ReplyDeleteThe fact that we are using a lot of gas really doesn't surprise me. Especially in the past few weeks when temperatures have reached extreme lows. As mentioned in previous comments above, no one here in Wisconsin should be really worried about if they can't have heat because it is too expensive. It is crazy that something so common can be making this much of an impact.
ReplyDeleteRecently, it makes sense that we have consumed such large amounts of gas due to the recent “arctic” temperature across the nation. In these times, gas is a mean of survival—without it, our homes will not be heated. In such a cold winter, this would obviously be devastating. Therefore, I do not think that the prices of this gas should increase, despite the large demand for it. If it increased by a large amount, some would not be able to afford to heat their homes.
ReplyDeleteThis is a very relevant topic. Although it was nice to have those couple days off of school, those extreme temperatures were not good for many homes and cars. With the prices of gas skyrocketing, it was expensive to heat and run many operations. I know the heat broke at my work Monday and I had to fill my car twice because gas tanks aren't supposed to fall below 1/2 or 1/4 full in these cold temperatures - and it was all very expensive. I agree with you that it seems unethical and unfair for prices to rise at such a needy time, but for the businesses it is very smart because regardless of the price, people need gas.
ReplyDeleteI found this completely outrageous because it is an essential in cold weather or people would literally die. The government should at least but a price ceiling or in fact make it illegal to raise prices to the extreme. Business is really unethical now a days and this is when the government needs to take a role or majority of the country will suffer if they haven't already. Millions shouldn’t suffer because a company wants to make a little extra cash.
ReplyDelete