May 2023 Volume 5

ENERGY

FIA Members, Consider Buying Now: You Won’t Get Hurt Falling Out the Basement Window! By Jane Seagraves

Recent Wall Street Journal headlines (and subheads) capture a lot of the drama playing out in today’s energy markets and reveal much about what forgers need to consider as they map out and execute their buying strategies: • Natural Gas: Fasten Your Seat Belts (February 11, 2023) The buffers that keep America’s natural-gas price fluctuations at bay are eroding. • Natural-Gas Prices Plunge, and Drillers Dial Back (February 23, 2023) Prices for fuel have fallen by two-thirds since mid-December.

Yet, the real takeaway from this entire situation can be summarized by the headline of this article: Consider Buying Now: You Won’t Get Hurt Falling Out the Basement Window! Welcome to the new normal of extreme energy-price volatility, one that rewards those prepared to go to market and lock in low prices when they are available, because those prices may very well be fleeting.

Quite a Quarter: Natural-Gas Prices in Freefall Over the past year, my colleagues and I at Transparent Energy have worked to educate our customers and prospects on the macro- and micro-factors transforming natural gas, and by extension electricity, markets. From the ongoing war in Ukraine – and the EU’s cold turkey exit from dependence on Russia’s energy reserves – to LNG exports and storage levels to weather, what we’ve really seen is a permanent change of a predominantly U.S.-only natural gas market to a conjoined U.S./European natural gas market. With a much bigger market, and with a very high demand for natural gas that accounts for pretty much every dekatherm in production, prices should be rising, not falling, right? One might think so, but hold on. This is where we need to look deeper, and why forgers need to be working with an expert to buy the energy that powers your buildings, operations, and entire portfolios.

TheWar in Ukraine In the past, we’ve detailed how the war inUkraine increased demand from Europe for U.S. natural gas supplies and how that bump in demand strained current production and put upward pressure on natural-gas prices. But guess what? We’re at the end of this cycle now – i.e., we’re a year into the war and Europe has adjusted . The EU bought our gas and steadily increased its winter storage supplies. In fact, sweeping legislation has been enacted by the EU requiring member countries to pretty much max out their winter natural gas permanently going forward. And while that is excellent news for U.S. suppliers and will keep demand for natural gas high for the long term, something else has happened in the short term: mild winter weather. This may be remembered as “the winter that didn’t happen.” Winter conditions in the U.S. and across Europe were incredibly

8

FIA MAGAZINE | MAY 2023