re: Gas Prices

quote:

---

It is being blamed on the change over from winter to summer gas.

---

It's possible that this contributes, but I doubt it is the main cause. Producers are able to prepare for this to a certain extent; at least enough to prevent this rapid of a price change. 10-15% over a couple week period seems pretty extreme for an event that can be planned for.

I'd argue that it has more to do with the Ukranian/Russia situation. Events like this raise uncertainty about future supply availabilities of crude in the global market. Increased uncertainty increases precautionary demand which increases price; and things are very uncertain right now.

Lutz Killian had a decent paper on this a few years back, that somehow got picked up by AER, called something like "Not all oil price shocks are alike". I don't like his last set of regressions, but his breakdown of various contributions to the evolution of oil prices is very revealing. And very relevant to the currently unstable state of world politics.

On that note, I'd venture that if you went check out oil trading patterns on NYMEX that you would find a large increase in the price and quantity of puts since escalation in Ukraine. Refiners are going to want to protect themselves from the possibility of a massive supply cutoff, so they purchase future options at higher than current prices, thereby driving current prices up.