No crystal ball for energy prices

Energy prices "most volatile on planet"

Last year at this time, calls were flooding into MX Energy's call center as people and businesses rushed to lock in natural gas prices before they went any higher.

This year, calls have been flooding in as people rush to lock in some of the lowest prices in well over a year.
"There's only one verity left. We live in a country of energy shortages," said Jeffrey Mayer, CEO of the Stamford, Conn., company.

And that means continued volatility in energy prices for the foreseeable future, according to Mayer and others.

Refining capacity for gasoline has not changed in 30 years in the U.S., meaning even drops in crude prices might not always work their way through to the pump, according to Walt Breitinger, a commodities trader at A.G. Edwards and Sons and a Times columnist.

"It doesn't matter how much the price of crude swings up or down, it's just one of many factors," Breitinger said.

Refinery bottlenecks caused by the phasing out of the MTBE additive have been one factor in rising gasoline prices, Breitinger said. Gasoline reformulated with ethanol has now come online to replace MTBE, and prices are falling.

Geopolitical events, oil inventories and OPEC policies also all play a role.

The price of oil rose last week in anticipation of OPEC's announcement it would cut production. But in Friday trading it slid, trading at $57.74 a barrel on the NYMEX near mid-day. Natural gas prices have been on their way up as cold fall weather has hit much of the nation. Natural gas traded at $7.16 per mmBtu on the NYMEX near mid-day Friday.

There will be one constant in energy markets in coming years, and that is increased demand from China and the United States, Breitinger said.

"We still have more cars, and bigger cars, and they're traveling longer and longer distances from city to suburb," Breitinger said.

Consumers interviewed over the past few weeks understand some of the above, but were quick to point fingers at other culprits.

"If the president can make up his mind what he wants to do with oil and everything we'd all be better off," said Frank Nobak, 33.

The construction worker said the price of gasoline comes down to politics.

David Homrich, of Highland, works for a local bank and understands money and markets. But headlines about exploding profits at oil companies caught his attention over the summer.

"I just thought the profits were off the wall," Homrich said. "I appreciate the fact they have to have strong earnings and all that. But the profits at BP and ExxonMobil were beyond belief."

All of the above and more means only someone with a crystal ball can forecast energy prices, according to Mayer.

His company is one of scores that offer residential and business customers fixed and hedged prices on natural gas supply, usually through major utilities such as NIPSCO.

In the early days of the industry in the late 1990s, such fixed-price plans were often not-so-subtly pitched as a way for consumers to beat the market.

No one uses that pitch today. Now, it's all about locking in a little certainty in an unsure world.

"Energy prices have become the most volatile on the planet," Mayer said. "If stock prices were that volatile, you couldn't walk down Wall Street for all the people jumping out of windows."