SHORT-TERM ENERGY OUTLOOK – Prices

Onyx Power and Gas Consulting continues a weekly series providing the Short Term Energy Outlook as of May 9, 2017.  This series of news articles should provide a complete insight on the current conditions of the energy…enjoy, check out archives and come back each week for additional information on how all sorts of energy sources impact our daily lives.

Prices

  • North Sea Brent crude oil spot prices averaged $52 per barrel (b) in April, $1/b higher than the March average and the fifth consecutive month that Brent crude oil spot prices averaged between $50/b and $55/b. EIA forecasts Brent prices to average $53/b in 2017 and $57/b in 2018. West Texas Intermediate (WTI) crude oil prices are forecast to average $2/b less than Brent prices in both 2017 and 2018.
  • NYMEX contract values for August 2017 delivery traded during the five-day period ending May 4 suggest that a range of $37/b to $63/b encompasses the market expectation for WTI prices in August 2017 at the 95% confidence level.
  • For the 2017 summer driving season (April through September), U.S. regular gasoline retail prices are forecast to average $2.36/gallon (gal), compared with $2.23/gal last summer. The higher forecast gasoline price is primarily the result of higher forecast crude oil prices. The annual average price for regular gasoline in 2017 is forecast to be $2.33/gal, which, if realized, would result in the average U.S. household spending about $150 more on motor fuel in 2017 compared with 2016.
  • In April, the average Henry Hub natural gas spot price was $3.10 per million British thermal units (MMBtu), 22 cents/MMBtu above the March level. New natural gas export capabilities and growing domestic natural gas consumption contribute to the forecast Henry Hub natural gas spot price rising from an average of $3.17/MMBtu in 2017 to $3.43/MMBtu in 2018. NYMEX contract values for August 2017 delivery traded during the five-day period ending May 4 suggest that a range of $2.47/MMBtu to $4.49/MMBtu encompasses the market expectation for Henry Hub natural gas prices in August 2017 at the 95% confidence level.
  • Total U.S. electricity generation from utility-scale power plants averaged 11,150 gigawatthours per day in 2016. Forecast generation declines by 1.2% in 2017 and then grows by 1.9% in 2018. EIA expects the annual average U.S. residential electricity price to increase by 2.4% in 2017 and by 2.3% in 2018.
  • EIA expects growth in demand for U.S. coal exports to contribute to a 5% increase in coal production in 2017. Forecast growth in coal-fired electricity generation leads to an additional 1% increase in coal production in 2018. EIA estimates the delivered coal price averaged $2.11/MMBtu in 2016, a 5% decline from the 2015 price. Coal prices are forecast to increase in 2017 and 2018 to $2.16/MMBtu and $2.22/MMBtu, respectively.
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SHORT-TERM ENERGY OUTLOOK – Forecast Highlights

Onyx Power and Gas Consulting continues a weekly series providing the Short Term Energy Outlook as of May 9, 2017.  This series of news articles should provide a complete insight on the current conditions of the energy…enjoy, check out archives and come back each week for additional information on how all sorts of energy sources impact our daily lives.

Forecast Highlights

Global liquid fuels

  • North Sea Brent crude oil spot prices averaged $52 per barrel (b) in April, $1/b higher than the March average and the fifth consecutive month that Brent crude oil spot prices averaged between $50/b and $55/b. EIA forecasts Brent prices to average $53/b in 2017 and $57/b in 2018. West Texas Intermediate (WTI) crude oil prices are forecast to average $2/b less than Brent prices in both 2017 and 2018.
  • NYMEX contract values for August 2017 delivery traded during the five-day period ending May 4 suggest that a range of $37/b to $63/b encompasses the market expectation for WTI prices in August 2017 at the 95% confidence level.
  • Implied global petroleum and liquid fuels inventories are estimated to have increased by 0.4 million barrels per day (b/d) in 2016. EIA forecasts inventory builds to average 0.2 million b/d in 2017 and then increase to an average of 0.5 million b/d in 2018.
  • U.S. crude oil production averaged an estimated 8.9 million b/d in 2016. U.S crude oil production is forecast to average 9.3 million b/d in 2017 and almost 10.0 million b/d in 2018. EIA estimates that crude oil production for April 2017 averaged 9.1 million b/d, which is 0.2 million b/d above the April 2016 level and 0.6 million b/d above the recent monthly average low reached in September 2016.
  • For the 2017 summer driving season (April through September), U.S. regular gasoline retail prices are forecast to average $2.39/gallon (gal), compared with $2.23/gal last summer. The higher forecast gasoline price is primarily the result of higher forecast crude oil prices. The annual average price for regular gasoline in 2017 is forecast to be $2.34/gal, which, if realized, would result in the average U.S. household spending about $160 more on motor fuel in 2017 compared with 2016.

Natural gas

  • U.S. dry natural gas production is forecast to average 74.1 billion cubic feet per day (Bcf/d) in 2017, a 1.8 Bcf/d increase from the 2016 level. This increase reverses a 2016 production decline, which was the first annual decline since 2005. Natural gas production in 2018 is forecast to be 3.2 Bcf/d more than the 2017 level.
  • In April, the average Henry Hub natural gas spot price was $3.10 per million British thermal units (MMBtu), 22 cents/MMBtu above the March level. New natural gas export capabilities and growing domestic natural gas consumption contribute to the forecast Henry Hub natural gas spot price rising from an average of $3.17/MMBtu in 2017 to $3.43/MMBtu in 2018. NYMEX contract values for August 2017 delivery traded during the five-day period ending May 4 suggest that a range of $2.47/MMBtu to $4.49/MMBtu encompasses the market expectation for Henry Hub natural gas prices in August 2017 at the 95% confidence level.

Electricity, coal, renewables, and emissions

  • Total U.S. electricity generation from utility-scale power plants averaged 11,150 gigawatthours per day in 2016. Forecast generation declines by 1.2% in 2017 and then grows by 1.9% in 2018. EIA expects the annual average U.S. residential electricity price to increase by 2.4% in 2017 and by 2.3% in 2018.
  • EIA expects growth in demand for U.S. coal exports to contribute to a 5% increase in coal production in 2017. Forecast growth in coal-fired electricity generation leads to an additional 1% increase in coal production in 2018. EIA estimates the delivered coal price averaged $2.11/MMBtu in 2016, a 5% decline from the 2015 price. Coal prices are forecast to increase in 2017 and 2018 to $2.16/MMBtu and $2.22/MMBtu, respectively.
  • Wind energy capacity at the end of 2016 was 81 gigawatts (GW). EIA expects wind capacity additions in the forecast will bring total wind capacity to 102 GW by the end of 2018.
  • Total utility-scale solar generation capacity is forecast to increase by 48% from 21 GW at the end of 2016 to 32 GW at the end of 2018. Utility-scale solar electricity generation is forecast to account for more than 1% of total utility-scale electricity generation in 2018.
  • After declining by 1.7% in 2016, energy-related carbon dioxide (CO2) emissions are projected to decrease by 0.7% in 2017 and then increase by 2.3% in 2018. Energy-related CO2 emissions are sensitive to changes in weather, economic growth, and energy prices.

The professional consultants at Onyx Power & Gas Consulting are always ahead of the current issues that may affect energy consumption and pricing. Now is the time to partner with an Onyx professional consultant to discuss energy management and secure energy prices based on today’s stable pricing.  Volatility in the energy markets makes it too precarious to take chances.  Partner with Onyx Power & Gas in Making Energy Make a Difference!

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TODAY IN ENERGY – Wind Turbines

Onyx Power and Gas Consulting continues a weekly series providing the Short Term Energy Outlook as of May 9, 2017.  This series of news articles should provide a complete insight on the current conditions of the energy…enjoy, check out archives and come back each week for additional information on how all sorts of energy sources impact our daily lives.

Wind turbines provide 8% of U.S. generating capacity, more than any other renewable source

graph of U.S. utility-scale electric generating capacity, as explained in the article text

Source: U.S. Energy Information Administration, Preliminary Monthly Electric Generator Inventory

Wind generators accounted for 8% of the operating electric generating capacity in the United States in 2016, more than any other renewable technology, including hydroelectricity. Wind turbines have contributed more than one-third of the nearly 200 gigawatts (GW) of utility-scale electricity generating capacity added since 2007. The increase in wind development in the United States over the past decade reflects a combination of improved wind turbine technology, increased access to transmission capacity, state-level renewable portfolio standards, and federal production tax credits and grants.

More than half of U.S. wind capacity is located in five states: Texas, Iowa, Oklahoma, California, and Kansas. In three states—Iowa, Kansas, and Oklahoma—wind makes up at least 25% of in-state utility-scale generating capacity. Several states with the highest wind capacity are located in the Midwest, a region with favorable wind resources. As of December 2016, nine U.S. states had no operational utility-scale wind facilities: Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, South Carolina, and Virginia.

graph of operating wind generating capacity, as explained in the article text

Source: U.S. Energy Information Administration, Preliminary Monthly Electric Generator Inventory

Texas alone accounts for almost a quarter of total U.S. wind capacity, and electricity generated by these turbines made up 13% of Texas’s total electricity output in 2016. At particularly windy times, wind can provide a much larger share of Texas’s electricity generation. For instance, in the early hours of March 23, 2017, wind output on the Electric Reliability Council of Texas (ERCOT) grid in Texas accounted for up to 50% of the electricity generation mix, the highest wind penetration level seen in the ERCOT electric system to date.

graph of wind net generation and wind capacity factors, as explained in the article text

Source: U.S. Energy Information Administration, Electric Power Monthly

Although wind makes up about 8% of total U.S. electricity generating capacity, wind generators provided a smaller share (5%) of total U.S. electricity generation in 2016 because wind turbines have relatively low capacity factors. Capacity factors, which measure actual output over a certain period as a percent of the total mechanical ability of the turbine to generate given sufficient wind, average between about 25% and 40% for wind generators and vary based on seasonal patterns and geographic location.

The average wind generating facility in the United States consists of about 50 turbines. However, the Alta Wind Energy Center in Kern County, California, is the largest wind power site in the United States with 586 turbines and a combined 1,548 megawatts (MW) of capacity across several separate projects.

Until late 2016, all U.S. wind capacity was on land. The first U.S. offshore wind project, Block Island Wind Farm, began commercial operation off the coast of Rhode Island in December 2016 with a generating capacity of 29.3 MW. Two other offshore wind projects off the coasts of Ohio and Virginia are not yet under construction but are seeking regulatory approvals.

The professional consultants at Onyx Power & Gas Consulting are always ahead of the current issues that may affect energy consumption and pricing. Now is the time to partner with an Onyx professional consultant to discuss energy management and secure energy prices based on today’s stable pricing.  Volatility in the energy markets makes it too precarious to take chances.  Partner with Onyx Power & Gas in Making Energy Make a Difference!

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WHAT DRIVES PETROLEUM PRODUCT PRICES? – Balance

Onyx Power and Gas Consulting continues a weekly series providing the Short Term Energy Outlook as of January 10, 2017.  This series of news articles should provide a complete insight on the current conditions of the energy…enjoy, check out archives and come back each week for additional information on how all sorts of energy sources impact our daily lives.

What drives petroleum product prices: Balance

The seasonal consumption pattern of gasoline, with higher demand in the summer than in the winter, affects inventory management by refiners and end users. In the summer driving season, gasoline inventories tend to decline whereas in the fall and winter, gasoline inventories are replenished. Distillate inventories also exhibit seasonality based on distillate’s use as a heating fuel in the winter months, although this effect has declined in recent years as distillate is increasingly used as a low-sulfur transportation fuel. In areas of the United States, such as the Northeast, where distillate is still widely used for heating, inventories display a more pronounced seasonal pattern of decreasing in the winter time and increasing in the summer.

Because inventories can satisfy either current or future demand, their level is sensitive to the relationship between the current product prices and expectations of future prices. If market expectations indicate a change toward relatively stronger future demand or lower future supply, prices for futures contracts will tend to increase, encouraging inventory builds to satisfy the otherwise tightening future balance. On the other hand, a sharp loss of current production or unexpected increase in current consumption will tend to push up spot prices relative to futures prices and encourage inventory drawdowns to meet the current demand. The futures curve for gasoline, for example, exhibits the seasonality inherent to the product’s consumption. Prices for summer months are higher, which encourages inventory builds in the transition months between seasons to satisfy future demand.

The professional consultants at Onyx Power & Gas Consulting are always ahead of the current issues that may affect energy consumption and pricing. Now is the time to partner with an Onyx professional consultant to discuss energy management and secure energy prices based on today’s stable pricing.  Volatility in the energy markets makes it too precarious to take chances.  Partner with Onyx Power & Gas in Making Energy Make a Difference!

 

Posted in CO2, Community Improvement, Consulting, Crude Oil, Crude Oil Prices, Drilling, Electricity, Electricity Prices, Emmissions, Energy, Energy Consumption, Energy Deregulation, Energy Prices, Environment, Fuel, Fuels, Gas, Generation, Natural Gas, Natural Gas Prices, OECD, Oil, Press Releases, Services, Shale Gas | Tagged , , , , , , , , , , , , | Leave a comment

WHAT DRIVES PETROLEUM PRODUCT PRICES? – Trade

Onyx Power and Gas Consulting continues a weekly series providing the Short Term Energy Outlook as of January 10,  2016.  This series of news articles should provide a complete insight on the current conditions of the energy…enjoy, check out archives and come back each week for additional information on how all sorts of energy sources impact our daily lives.

What drives petroleum product prices: Trade

With significant increases in U.S. crude oil production and higher refinery runs, increased production of petroleum products reduced the reliance on oil imports to meet domestic demand. In the fourth quarter of 2012, the United States became a net exporter of gasoline after historically being a net importer. Since then, the United States has often been a net exporter of gasoline during the winter months. PADD 3 has consistently been a net exporter of gasoline since the third quarter of 2009. However, PADD 1 remains a net importer because of transportation constraints in moving petroleum products from the U.S. Gulf Coast to the U.S East Coast.

gasoline_net_imports

gasoline_net_imports_by_padd

The United States became a net exporter of distillate in the fourth quarter of 2007, five years before the first time the United States was a net gasoline exporter. Diesel, a type of distillate, is the primary transportation fuel source in much of the world, unlike in the United States, providing U.S. refiners with international consumers year-round. PADD 3 has been a net exporter of distillate since the third quarter of 2001. PADD 1 is typically a net importer of distillate, while PADD 5 has usually been a net exporter of distillate since 2007.

distillate_fuel_net_imports

distillate_oil_net_imports

The professional consultants at Onyx Power & Gas Consulting are always ahead of the current issues that may affect energy consumption and pricing. Now is the time to partner with an Onyx professional consultant to discuss energy management and secure energy prices based on today’s stable pricing.  Volatility in the energy markets makes it too precarious to take chances.  Partner with Onyx Power & Gas in Making Energy Make a Difference!

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WHAT DRIVES PETROLEUM PRODUCT PRICES? – Financial Markets

Onyx Power and Gas Consulting continues a weekly series providing the Short Term Energy Outlook as of January 10,  2016.  This series of news articles should provide a complete insight on the current conditions of the energy…enjoy, check out archives and come back each week for additional information on how all sorts of energy sources impact our daily lives.

What drives petroleum product prices: Financial Markets

Gasoline and distillate both have futures contracts for delivery in New York Harbor on the New York Mercantile Exchange (Nymex). Since 2007, open interest (the number of contracts in a trading session that have not been settled or closed) and trading volume in these contracts increased for both products.

The Commodity Futures Trading Commission publishes a weekly activity report, the Commitment of Traders Report, on oil and petroleum product open interest on exchanges (e.g., Nymex). In this report, the activities of multiple trading categories are detailed, including physical participants (producers, merchants, processors, and end users), money managers (usually hedge funds or other sophisticated traders), and swap dealers (traditionally investment banks or commodity broker/dealers). Money managers generally tend to be net long—more futures contracts are bought rather than sold—on RBOB and ULSD futures, though significant changes in market expectations of demand and supply for these products can push overall positions to be net short.

exchange_traded_futures

The professional consultants at Onyx Power & Gas Consulting are always ahead of the current issues that may affect energy consumption and pricing. Now is the time to partner with an Onyx professional consultant to discuss energy management and secure energy prices based on today’s stable pricing.  Volatility in the energy markets makes it too precarious to take chances.  Partner with Onyx Power & Gas in Making Energy Make a Difference!

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WHAT DRIVES PETROLEUM PRODUCT PRICES? – Prices and Crack Spreads

Onyx Power and Gas Consulting continues a weekly series providing the Short Term Energy Outlook as of January 10,  2016.  This series of news articles should provide a complete insight on the current conditions of the energy…enjoy, check out archives and come back each week for additional information on how all sorts of energy sources impact our daily lives.

What drives petroleum product prices: Prices and Crack Spreads

Gasoline is the most widely used petroleum product in the United States. Although gasoline is traded globally and priced at various locations around the world, all these prices tend to move together in the long run because gasoline can be transported between markets, thereby linking their supply and prices. Differences in absolute price levels as well as short-term price changes across the world reflect varying gasoline specifications, refinery maintenance schedules, unplanned refinery outages, transportation constraints, peak consumption seasons, as well as regional inventory levels.

Distillate is also traded globally and priced in various regions around the world. Like the disparity in gasoline prices, the disparity in distillate prices primarily reflects differences in quality, primary uses, seasonal consumption, and local market factors.

In addition to trading physical quantities of petroleum products, market participants can also use futures contracts to buy or sell gasoline and distillate for future delivery, or to hedge or speculate on future price movements. Since 2006, the underlying commodity for the gasoline futures contract has been reformulated blendstock for oxygenate blending (RBOB), the petroleum component of gasoline in many areas of the country prior to the addition of ethanol to produce finished gasoline.

Since the spring of 2013, the underlying commodity for the distillate futures contract has been ultra-low sulfur diesel (ULSD), a distillate with sulfur content of less than 15 parts per million (ppm). Prior to this change, the underlying commodity for the distillate futures contract was allowed to have sulfur content up to 2,000 ppm, reflecting the type of distillate commonly used for home heating purposes.

Crack spreads, which represent the price difference between products and crude oil, can be used to determine the relative value of various petroleum products for refineries to produce. Crack spreads vary by product and can rise or fall depending on the time of year and on market conditions.

Seasonality

Petroleum product crack spreads often exhibit seasonality. During the summer months, the underlying commodity of the RBOB front month contract is required to be gasoline with a lower Reid vapor pressure (RVP) specification, a more expensive type of gasoline to refine. Starting March 1, RBOB futures prices tend to increase several cents from February averages to reflect the higher valued commodity. This, in turn, is reflected in a higher crack spread. The crack spread continues to remain fairly high through the late spring and into the summer months as the U.S. driving season picks up, resulting in higher domestic demand for the product. On September 1, the underlying commodity of the RBOB front month contract reverts back to a higher RVP specification, representing a lower-cost gasoline. The gasoline crack spread declines to reflect the lower price of gasoline.

As domestic gasoline consumption declines during the winter months, distillate consumption historically rises as consumers in the United States, particularly in the U.S. northeast, use distillate for heating purposes. With the increased demand, distillate crack spreads are usually highest from October to February.

The professional consultants at Onyx Power & Gas Consulting are always ahead of the current issues that may affect energy consumption and pricing. Now is the time to partner with an Onyx professional consultant to discuss energy management and secure energy prices based on today’s stable pricing.  Volatility in the energy markets makes it too precarious to take chances.  Partner with Onyx Power & Gas in Making Energy Make a Difference!

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WHAT DRIVES PETROLEUM PRODUCT PRICES? – Production

Onyx Power and Gas Consulting continues a weekly series providing the Short Term Energy Outlook as of January 10,  2016.  This series of news articles should provide a complete insight on the current conditions of the energy…enjoy, check out archives and come back each week for additional information on how all sorts of energy sources impact our daily lives.

What drives petroleum product prices: Production

Refineries produce a wide range of petroleum products when processing crude oil. More complex refineries can upgrade some of the volume of heavier or lower-quality streams into more valuable products such as gasoline or distillate. Some refineries also have a degree of flexibility with respect to the volume of gasoline versus distillate produced. Price signals can influence short-term production decisions as well as long-term investments that may influence the type of petroleum product produced. Total production of refinery products increased starting in 2013 as U.S. refineries process more crude oil, invest in additional processing units to upgrade products, and expand into international markets. The net increase in production has been driven by large increases in motor gasoline and distillate, despite decreases in products such as residual fuel oil.

gasoline_refinery_output

distillate_refinery_output

refinery_output

The professional consultants at Onyx Power & Gas Consulting are always ahead of the current issues that may affect energy consumption and pricing. Now is the time to partner with an Onyx professional consultant to discuss energy management and secure energy prices based on today’s stable pricing.  Volatility in the energy markets makes it too precarious to take chances.  Partner with Onyx Power & Gas in Making Energy Make a Difference!

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WHAT DRIVES PETROLEUM PRODUCT PRICES? – Consumption

Onyx Power and Gas Consulting continues a weekly series providing the Short Term Energy Outlook as of January 10,  2016.  This series of news articles should provide a complete insight on the current conditions of the energy…enjoy, check out archives and come back each week for additional information on how all sorts of energy sources impact our daily lives.

What drives petroleum product prices: Consumption

Countries outside of the Organization for Economic Cooperation and Development (OECD) drove increases in global demand for petroleum products in recent years. In aggregate, non-OECD countries consumed more petroleum products than OECD countries for the first time in 2014. Global distillate consumption tends to rise as developing countries show robust economic growth because their economies tend to be driven by industry and manufacturing rather than services. Distillate consumption can slow if economic growth expectations decline or as more countries move towards a more services-oriented economy. As many non-OECD countries continue to develop, their economies tend to be driven by industry rather than services. This trend has led to an increase in global distillate demand, and worldwide consumption of distillate is now the highest of any of the petroleum products.

product_demand

Gasoline is the most consumed petroleum product in the United States and is used primarily as a transportation fuel. Gasoline consumption is affected by a variety of factors including gasoline prices, disposable income, employment, weather, vehicle miles traveled, as well as regulations on fuel economy.

consumption_gas_retail

Distillate is the second-most consumed petroleum product in the United States. In addition to its use as a transportation fuel, distillate is also consumed for heating and power generation purposes. Distillate’s use as a heating fuel drives the seasonal pattern of higher consumption during the winter months. Distillate consumption is affected by economic growth and weather conditions as well as vehicle efficiency and miles traveled of heavy-duty vehicles.

consumption_distillate_retail

The professional consultants at Onyx Power & Gas Consulting are always ahead of the current issues that may affect energy consumption and pricing. Now is the time to partner with an Onyx professional consultant to discuss energy management and secure energy prices based on today’s stable pricing.  Volatility in the energy markets makes it too precarious to take chances.  Partner with Onyx Power & Gas in Making Energy Make a Difference!

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WHAT DRIVES PETROLEUM PRODUCT PRICES? – Overview

Onyx Power and Gas Consulting continues a weekly series providing the Short Term Energy Outlook as of January 10,  2016.  This series of news articles should provide a complete insight on the current conditions of the energy…enjoy, check out archives and come back each week for additional information on how all sorts of energy sources impact our daily lives.

What drives petroleum product prices: Overview

Although crude oil prices receive a lot of media attention, consumers purchase petroleum products refined from crude oil rather than the crude oil itself. Refiners produce many petroleum products from crude oil for a wide range of applications. Prices for some petroleum products, such as gasoline, are very visible to consumers, while others are much less so. This section focuses on the two most prominent groups of petroleum products—gasoline and distillate (or diesel fuel).

2017-01-18_11-35-36

The professional consultants at Onyx Power & Gas Consulting are always ahead of the current issues that may affect energy consumption and pricing. Now is the time to partner with an Onyx professional consultant to discuss energy management and secure energy prices based on today’s stable pricing.  Volatility in the energy markets makes it too precarious to take chances.  Partner with Onyx Power & Gas in Making Energy Make a Difference!

Posted in CO2, Community Improvement, Consulting, Crude Oil, Crude Oil Prices, Drilling, Electricity, Electricity Prices, Emmissions, Energy, Energy Consumption, Energy Deregulation, Energy Prices, Environment, Fuel, Fuels, Gas, Generation, Natural Gas, Natural Gas Prices, OECD, Oil, Press Releases, Services, Shale Gas | Tagged , , , , , , , , , , , , | Leave a comment