How do finance professionals in the gas market analyze the financial futures related to gas? Given the constantly fluctuating market prices, calculating the financial future may not possible without a solid set of ‘instruments’.
Gas price history is a powerful indicator of future trends. Gas market professionals use gas price history to gain invaluable insight into the gas markets, regardless of whether they buy or sell physical gas or deal with gas financial futures. Professionals undertake a comparison of the current and historical situations, along with the factors that give rise to these, and determine the particular direction of gas price movements.
In the commodities futures markets, one can also witness the presence of a wide variety of gas derivative instruments that help to enhance financial performance in physical markets. These instruments are used by professionals to derive information that enables producers and consumers to seek precautionary measures against sudden price fluctuations, apart from serving as powerful vehicles of speculative investment.
Price histories help gas professionals to get the big picture. The analyses undertaken by gas market professionals are powered by data on the real-time gas price, the price history, the trading volume history and other information. Using these parameters, gas market professionals observe price trends and trading patterns, and make informed decisions. Professionals also use price histories to gauge spreads and difference between prices, on futures contracts. For example, professionals might like to use price history to be able to hedge against price risks. Today, more than half of the states in the US use financial tools like futures contracts and weather risk insurance to stabilize the prices of gas.
Price histories also help chart out particular trends in gas prices, and they are correlated and compared to gas instruments in the energy or other financial markets. Gas price history has emerged as a widely accepted analytical tool to understand market fluctuations in gas. Combined with an analysis of seasonality, gas price histories can provide a powerful look into the future.

PRICE HISTORY

Alberta Gas Reference PriceThe Alberta Gas Reference Price is a monthly weighted average of an intra-Alberta consumers' price and an ex-Alberta border price, reduced by allowances for transporting and marketing gas (Gas Royalty Guidelines 1994).

The Gas Reference Price is effective beginning with 1994.

Select PricesThe Crown Royalty regime for natural gas is price sensitive. The Crown achieves price sensitivity using a base rate and a higher marginal rate as components of the royalty formula used to determine the Crown’s royalty share of natural gas. In the royalty formula, the select price is the price threshold above, which the higher marginal royalty rate applies. A separate select price is prescribed for each of old gas, new gas, and pentanes.

To account for inflation, the department adjusts the select price each year based on the GDP Implicit Price Index. The department calculates the select price by multiplying the previous years select price by the inflation factor. This price is published in the annual March edition of the Gas Royalty Calculation Information Bulletin.

Average Market Price (AMP)Alberta Energy published a monthly Alberta Average Market Price (AMP) for natural gas/residue gas. The AMP is given in units of $/1000 3 and $/GJ. The AMP in $/1000 m3 is used in the royalty rate formula to calculate the Crown's royalty volumes. The AMP in $/GJ is used in the valuation price test. This test specifies that the minimum valuation price that may be applied to the Crown's royalty share of production is 80% of the AMP ($/GJ) in effect during the month of sale.

The AMP was effective for the production years 1988 to 1993. All the information is about gas price history.

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2002

The monthly bill for a typical residential customer of Northwest Natural who used 59.8 therms decreased by $6.79 or, 10.5 percent. A typical customer’s bill dropped to $57.80 from $64.59. Commercial customers received a 14.9 percent rate decrease. Northwest Natural serves approximately 486,017 customers. Northwest Natural’s adjustment includes the effects of a recently approved elasticity mechanism, bill payment assistance and public purpose charges order, which slightly offset the amount of Northwest Natural’s decrease.

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The adjustment reduced Avista residential bills by 7 percent. A typical residential customer using 54 therms per month saw a reduction of $3.18 toward a lower monthly bill of $42.15. Commercial customers received an 8.2 percent rate decrease. This is in addition to a Commission approved 15.3 percent overall decrease that went into effect April 2, 2002. Avista serves approximately 80,285 customers in Southern Oregon.

The Commission decision also cut Cascade residential bills by 2.5 percent. The monthly bill for a typical customer using 62 therms per month dropped by $1.51, to $57.93 from $59.44. Commercial customers received a 3.9 percent rate decrease. Cascade serves approximately 45,265 customers in Central and Northeastern Oregon.

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