As promised, we’re now going to answer the question people have been asking: how do I get the natural gas prices I see in the NYMEX report? Actually, it’s pretty simple, and only requires one step:

Step 1: build a pipeline from your meter to Louisiana…

Sorry. Hopefully, you saw that coming. The NYMEX price is the price for raw gas that’s being paid at one of the major gas pipeline terminuses, the Henry Hub in Erath, Louisiana. So if you are in Erath Louisiana, and you’ve got the NYMEX settle price in your pocket, what you’ll get in return is a clear, odorless cloud of gas containing 1 mmBTU…one million British Thermal Units, or roughly one thousand cubic feet…of mostly methane.

(Technically speaking, the NYMEX price is for futures contracts on the New York Mercantile Exchange, not for the gas itself. However, the spot price for gas…the price for people who are actually buying the raw gas…tends to be very close to the NYMEX rate. The NYMEX rate is considered a benchmark for gas prices in all markets in America where gas is bought and sold. There are quite a few of them. Our gas cloud is for demonstration purposes only.)

You’re now the owner of a ten foot x ten foot x ten foot cloud of gas. Assuming it hasn’t dissipated into the air yet, and assuming no one got careless with matches or sparks (the volatility of the natural gas markets are nothing compared to the volatility of your cloud!), your natural gas has to get from Henry Hub to your meter, along with enough other clouds to meet your demand for the year. This will require a few more steps: you will also need to build storage tanks, pumping and compression stations, valve stations, a command and control center…

…which is part of the reason why most people don’t get the NYMEX price. Because it makes a lot more sense to pay other people to handle the whole “from Erath to me” part. That way, you can take advantages of one of the wonders of modern engineering, the American natural gas pipeline system, which transports a highly volatile substance to virtually every point in our country safely, efficiently, quickly, and surprisingly cheaply. If you’d like to see a map of the system, take a look on our Web site.

Your natural gas bill has two components: the price you pay your provider for the gas that gets to your utility (if you haven’t chosen an alternate supplier, the utility is your provider, as well), and the price you pay the utility to deliver it to you. No matter who is providing your natural gas, the delivery costs should be about the same, because the utility charges all providers (including themselves) pretty much the same rate.

Where is that original raw gas price in your bill? That, as they say, is a very…interesting…question, and we’ll be discussing it in a future newsletter. Getting to the bottom of this is one of the ways that Cost Containment Intl. helps our customers find the savings they didn’t know they were missing.

Let’s say you’ve broken down the charges on your gas bill, and you’ve separated out the delivery costs. You’ve isolated what you are being charged for the actual gas. NOW can you get NYMEX? Only if your provider has decided to become a non-profit organization. This is the other part of the reason why you don’t get the NYMEX price. Your provider is in this business of reselling gas to make a profit. NYMEX is what they are looking to hit, or to beat. And then they sell to you.

Of course, even if you can’t build your own pipe, you could still be your own provider. Anyone can buy on the NYMEX. Is that the way to get the NYMEX price? We’ll find out next week.

Check the NYMEX