Tägliche Haupterneuerung-Spitzen

Back in late June, I wrote about how our natural gas 5 year contract with Direct Energy was coming up for renewal and we had a decision to make.

We have made it.

We are not renewing. Not with Direct Energy, the current natural gas supplier with whom we have the contract; not with any of its competitors.

Curious as to why not?

Several reasons.

First, the more than 50% premium we would have to pay for a new 5 year natural gax fixed price contract of 34.9 cents per cubic meters over the current spot price we will receive from Enbridge of 20.4349 as of July 1st is just way, way too much to swallow. Last time we had to make this decision, the premium was only around 5 cents more for the fixed price contract.

Second, the home we currently live in has a high efficiency furnace. The prior home did not. So, we will be using the natural gas to heat our home in the winter more efficiently.

Third, we have a smaller home vs the 2 story 3,500 square foot home we had 5 years ago when we entered into the agreement. This means, everything else being equal, we will use less natural gas to heat our home.

Fourth, after going through two home energy audits, replaced the main floor windows with ENERGY STAR windows, sealed some of the gaps causing air leakage (not finished just yet), our home is becoming more and more energy efficient all the time.

Reasons 2, 3 and 4 above mean that our consumption of natural gas will be less than what it was 5 years ago. So, there is less of a financial incentive to enter into a long term fixed price contract for us.

As well, if global warming is true, then over the long term there should be less of a nead to heat our homes as the winters should become shorter with fewer days and nights of extreme cold, although one cannot go be last winter in our area.

Lastly, there is no consensus that I could find on the long term changes in the supply and demand for natural gas in North America. Why is this important? Simple supply / demand economics; if supply goes up at a rate slower than demand then, everything else being equal, the price for natural gas should go up.

I did find a 2003 Summary of a workshop on U.S. Natural Gas Demand, Supply, and Technology: Looking Toward the Future on the Internet which indicated an expected approximately 2 percent average annual increase in demand for natural gas from 2003 through 2025, while U.S. and Canadian sourced production will remain flat.

Yet, these numbers are now 9 years old.

Who foresaw the depth of the stock market over the past 18 months? You? Me? Professionals?

So, not wanting to pay a premium of more than 50% for a 5 year fixed price natural gas contract over the current spot price, I did not renew. I can buy some shares of natural gas exploration companies if I want to do my own hedging in case the price of natural gas dramatically goes up during the next 5 years. In fact, that might not be a bad idea.

Again, I’m not telling you what to do. I’m simply letting you know what we did and why.