Dividends and US senator seeks probe of natural gas price spikes

All systems work until they do not and then everyone looks for the enemy or villain. In late February the hydro grid in Texas failed. In was terrible and similar to most events there was a wide variety of reasons. Power plants than run on natural gas, oil and nuclear froze, windmills and solar panels did not generate electricity (although they make up 10% of the supply) and electricity did not come to many Texans. There are many consequences but blaming the victim is high on the list. As the snow and ice came with the freezing weather, people turned up their heat or caused a spike in demand. With limited supply, the regulator of the electricity system had to do revolving blackouts to keep the system running.

In an article by Matthew Daly of the Associated Press, the politicians jumped into the blame game. The Governor and Lt Governor blamed the Green New Deal or 10% of the system for failing the entire system. This was concerned suspect once people learned of solar and wind capacity, after the state they are in is Texas. Texas is the center of the oil and gas industry and leading producer of natural gas. If the the components in a natural gas generator froze, it might be more reasonable to blame the ability of the system to endure winter weather. It should be noted the average temperate in February tends to be in the 50’s not the 30’s. Over the next few months there will be a report on what happened and how to avoid it in the future.

For many years Texas has been the home of surplus natural gas and this means for the average consumer for their gas and electric bill, they do not have fix prices, after it is Texas. During the outage, natural gas prices went up and not just a bit but over a 100 times typical levels. Minnesota Senator Tina Smith among others said the producers had to pay spot prices and they pass the expenses to customers and it is too high. Senator Smith wrote to the Energy Department, Federal Energy Regulatory Commission and the Commodities Future Trading Commission.

An example of the spot pricing increasing was in Winfield, Kansas the price of natural gas was $3.00 per unit, it increased to $400 a unit. Normally, Winfield pays $1.5 million a year in gas costs, expects to be charged $10 million for the week.

Linking to dividend paying stocks, when GameStop shares soared, it was a news event and many try to speculate. When natural gas prices soared, fewer people could speculate although over the coming months you will hear some who did. Commodity prices can and do jump, it is part of the cycles and squeezes, to try to stay away from the the squeezes invest in profitable companies that can pay dividends. They can pay their bills, likely have policies and procedures to deal with the hopefully one time events and life can continue.

There are more questions than answers, till the next time – to raising questions.

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