Marketing and Pricing

Marketing Gas

Natural gas is normally sold from the wellhead in the production field to purchasers in standard volume measurements of thousands of cubic feet (Mcf). However, consumer bills are usually measured in heat content or therms. One therm is a unit of heating equal to 100,000 Btu.

Price Formation in the Gas Industry

Natural gas is a commodity whose price goes up and down according to supply and demand fluctuations. There are several factors that influence supply and demand, such as the economy and weather, and these factors ultimately set the price of gas.  Weather has the strongest impact on gas prices and is also the most difficult to predict. The cost of natural gas supplies currently makes up about 70 to 75% of consumers' annual gas bills; the rest is delivery charges and taxes.

In North America and Western Europe, natural gas production has not kept pace with rising demand, so the national market price of natural gas has increased, sometimes dramatically.

Record summer injections have eased concerns over adequate storage heading into winter. However, colder than normal weather could cause storage levels to be drawn down at an accelerated pace during the winter, impacting prices.