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Volatility is a word that has become part of our everyday lexicon. By definition,
volatility means rapid instability, with an emphasis on “rapid.” Whether or not
we like it, we are forced to use the word often when discussing the housing
market, employment, and the overall economy. Volatility has been in use
particularly when describing recent weather phenomenon. Just ask anyone living
in the southern states, which have been experiencing record amounts of snow this
winter. And, volatility often is used to characterize the energy front as well.
When we hear the word volatile in the energy context, it generally is used
to describe pricing. Recent history has provided examples of volatility
effecting both the short and long term.
We’ve seen swings of 30 percent or more in pricing from one month to the next –
both up and down. The January 2009 NYMEX settlement price went from $6.136 per
dekatherm to $4.476 in February 2009. Conversely, the December 2009 settlement
price jumped from $4.486 to $5.814 the very next month.
This type of
short-term volatility simply is part of the energy world. It is predominantly
driven by the weather.
We’ve also dealt with volatility in a much longer term market – rapid change
having a more lengthy effect on price. One need only look back as recently as
2008, when summer prices skyrocketed to unprecedented highs. Prices topped $8
per dekatherm in March 2008 and remained over $8 through September. The pinnacle
of this volatile period was July, when prices hit an unheard of level over $13.
These price changes
were attributed primarily to the devastating hurricanes of that period, but
other factors also had a profound effect – rig counts, storage levels, and
unexpected economic news – to mention a few.
Obviously, no one knows what the future holds. But the commonly used expression,
"Those who ignore history are bound (or doomed) to repeat it," can certainly be
a guide when making energy decisions.
Your CenterPoint Energy Services account
executive can share a variety of ideas to help you manage your energy costs in
the volatile energy world.
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