This is a BIG story about corruption and price-fixing. While the higher than normal prices might have had the incidental benefit of making renewable energy more marketable, the corruption is reminiscent of the ENRON debacle. Why isn’t anybody paying attention?
Natural Gas Prices Investigated
Kristyn Ecochard, June 26, 2007 (UPI)
Senate Permanent Subcommittee on Investigations, Sen. Carl Levin, D-Mich., chairman, and Sen. Norm Coleman, R-Minn., ranking member; Amaranth LLC; Intercontinental Exchange Inc. (ICE) and New York Mercantile Exchange (NYMEX); Commodity Futures Trading Commission (CFTC); Industrial Energy Consumers of America, Paul Cicio, president; Municipal Gas Authority of Georgia, Arthur Corbin, president/CEO
overall supply seems pretty consistent (click to enlarge)
"Excessive Speculation in the Natural Gas Market" details Amaranth LLC manipulations of gas prices through obtaining control of supply in the commodity’s two major markets, the ICE and NYMEX. According to this piece: “The larger-than-usual differences between winter and summer futures prices that prevailed during the spring and summer of 2006 were largely the result of Amaranth's large-scale trades rather than the normal market interaction of many buyers and sellers.”
- Senate Subcommittee hearing June 25 at which the report was released, following a nine-month investigation into 2005 - 2006 price fluctuations and related Amaranth LLC activities.
- Next hearing: July 9.
Senate Subcommittee hearing in DC.
- Cicio said a $0.25 cent natural gas price elevation could cost businesses $5.5 billion in a year. In 2006, the natural gas price dropped nearly $2.60 after Amaranth's collapse!
- From early 2006 until September 2006, Amaranth controlled the natural gas market by daily futures purchases.
- When the more carefully regulated NYMEX forced Amaranth to reduce its gas position, it shifted holdings to ICE, which is not regulated by the CFTC. (Trading on one exhange affects price on the other.) The subcommittee recommended putting the CFTC in charge of ICE.
- Natural gas prices are expected to rise through 2030, without market manipulation, due to supply issues. Coal is expected to be cheaper than gas by 2020.
pretty obvious something is going on here (click to enlarge)
- Levin: "It's one thing when speculators gamble with their own money; it's another when they turn U.S. energy markets into a lottery where everybody is forced to gamble with them, betting on prices driven by aggressive trading practices…"
- Cicio: "At the heart of the matter is that every consumer in the country assumes that the government is protecting their interests and that markets are working and operating on a level playing field. Nothing could be further from the truth…Amaranth completely dispels the Wall Street myth that the market is too large for any one company to manipulate."
- Corbin: "To bring natural gas prices back to a long-term affordable level, we ultimately need to increase the supply of natural gas. However, equally critical is to restore public confidence in the pricing of natural gas…This requires a level of transparency in natural gas markets which assures consumers that market prices are a result of fundamental supply and demand forces and not the result of manipulation or other abusive market conduct."