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Natural gas traded sideways to slightly higher on moderate volume on Friday as energy traders were digesting the higher prices that we experienced on Thursday after the EIA storage figure was released and an anticipated Japanese import boom of LNG (liquefied natural gas). The open interest (amount of open sales or purchases in accounts at the nymex) has not changed much in the last two sessions but the weather forecast has turned colder. The 6 to 10 day forecast is now calling for below to much below average temperatures for the entire Midwest and Northeast. That may not cause another spike higher right away but it will certainly help to support the market and the storage change number 2 weeks from now could show another withdrawal instead of a storage build which is what happened last year for this same week. One other point to note is that we are seeing more news articles about the possible effects of the Japan crisis on our natural gas prices since the alternative seems to be focused on natural gas rather than coal.
On the electricity front this morning, the biggest single source of electricity in the United States is energy coming from coal-fired power plants and some folks believe that this source of energy is too expensive given the human cost in terms of the pollutants that are being released in the atmosphere. The Environmental Protection Agency this past week proposed a rule to make that electricity much cheaper metaphorically. You see, burning coal has the unfortunate side effect of releasing mercury and arsenic into the air. It is generally agreed that burning coal for electricity puts at least 48 tons of mercury into the air, the largest unregulated source of mercury. The problem is that mercury is an extremely toxic metal which affects and harms the environment and can be potentially fatal to growing infants and people. To some folks, this the real cost of electricity besides the price on the bill. However, the argument goes that coal companies think it has been free. The new rules from the EPA require the coal fired utility industry to lower mercury emissions by more than 90%. There is no actual debate that this is possible. More than half the industry already meets some of the standards. Some of the companies will shift away from natural gas rather than burning coal while some utilities will shift to clean renewable power. We’ll see how this plays out in the coming months.
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