The Henry Hub is the best known natural gas trading location in the world. There is certainly no more liquid point in the industry. An average of almost 400,000 natural gas futures contracts trade there each day. The Henry price is used to compute location ‘basis’ at all other natural gas trading points in North America and thus is the reference price for tens-of-thousands of derivative instruments and other commercial contracts. In effect, the Henry Hub is the center of the natural gas trading universe. What if I were to tell you that Henry Hub is not a hub? It is not all located at some single spot you can drive by called Henry. And the gas flow through this so called hub is minimal. Could this be another LIBOR scandal where a benchmark is not what we thought? Or is all well and good at Henry, regardless of these revelations? Let’s find out why Henry is the Hub, why it developed the way it did, and how changes in gas flows from the big shale plays could impact Henry in the future.
Here’s a heads up on this blog series. The Henry Hub in some way touches almost every aspect of the U.S. natural gas market. Its function is unique, it’s role frequently misunderstood, and changes are on the way to Henry Hub. The shale gas phenomenon combined with the potential for LNG exports could change its value relative to other parts of the market in North America. And that would be a big deal. Consequently this is not going to be a short blog series. It is going to take a number of postings to cover this topic. And for it all to make sense, we need to start at the beginning – where the Henry Hub came from in the first place.
The Time Before Henry
Trading of natural gas as a commodity is not something that goes back to the early days of the petroleum industry. Just over twenty-five years ago, most natural gas was sold by producers under long-term, life of lease contracts to pipelines at regulated prices. In 1985 that started to change with Federal Energy Regulatory Commission (FERC) Order 436 which created ‘open access’ on pipelines – in effect, allowing others besides the pipelines to ship gas. That really kicked off the spot market. Trade publications started to track prices at a variety of locations around the country, and for the first time there was some transparency in the market for natural gas prices. But it was still a very primitive market tangled up with legacy contracts and vestiges of price controls. Nevertheless, by the late 1980s natural gas started to be trade actively – mostly on a monthly basis during that magical period at the end of each month called bid week. The Natural Gas Decontrol Act finally wiped away the last vestiges of price controls in 1989.
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Electric cars are they conserving energy? Rev4
Ask yourselves what is the real cost of “Electric Car”?
Note: Electricity is a secondary form of energy derived by utilizing one form of energy to produce electric current.
Let us look at the facts:
In order to produce electricity, we need some form of energy to generate electricity, whereby you lose a substantial amount of your original source of energy in the generation process.
In the process we are losing the efficiency of the initial energy source, since it is not a direct use of the energy.
Let us take it a step further. To generate electricity we utilize; coal, oil, natural gas, nuclear, hydro electric - water, photovoltaic-solar, wind, geothermal, etc. Many electricity generating plants utilize fossil fuel, which creates pollution.
Do you realize how much of the initial source of energy you lose to get the electricity you need for your electric automobile; you also lose electricity in the transmission lines.
Why are we jumping to a new technology, without analyzing the economic cost, the effective return and efficiency of such technology; while computing and measuring its affect on the environment?
Natural gas vehicles are a direct source of energy, where you get the most for your energy source – in efficiency and monetary value. Cost of natural gas to a comparable gallon of gas ranges around $1, it has higher octane and extends the life of your engine, it is also safer than gas.
In these hard economic times – I would think, you would want to get the most for your dollar – and not waste resources.
Another economic impact would be the loss of road tax on fuel, these funds are used to build and maintain the highway infrastructure.
“It is Cheaper to Save Energy than Make Energy”
YJ Draiman, Director of Utilities & Sustainability
http://www.energysavers2.com
Will High Electricity Rates Drive Innovation? Escalating costs of OIL will produce innovation!YJ Draiman's vision is to make Los Angeles as the World Capital of Renewable energy and conservation.
http://www.yjdraimanformayor.com
Electric cars are they conserving energy? No!
I worked with UPS in Chicago in the early 90's, researching the conversion of UPS vehicles to Natural Gas as a primary fuel with overnight slow fill stations on UPS compound.
If we are to survive the Energy crisis and become energy independent, we must utilize every effort not to waste our energy resources. Innovation and technology will eventually save the day.
Electric cars are a fiction of energy conservation, (Look at all the costs associated with such technology); it is not a viable option.
We must look into other forms of fuel, and invest heavily into R&D.
YJ Draiman, Director of Utilities & Sustainability
http://www.yjdraiman.org
Energy & Utility Auditor, Energy efficiency analysis