Skip Navigation

How Natural Gas Transportation Can Drive Up Energy Prices

How Natural Gas Transportation Can Drive Up Energy Prices

How exactly does the transportation of natural gas impact energy prices?

One factor that needs to be understood whenever looking at market pricing trends is supply and demand. Factors that may drive supply include increases in production and expansion of drilling, while demand factors are weather, development, and so on. However, one factor that isn’t talked about nearly as much as it ought to be is transportation. What we’re referring to is the movement of natural gas along inter- or intrastate pipelines, from where natural gas is produced to where it’s actually used. How exactly does the transportation of natural gas impact energy prices? Let’s take a look.

Maximum Capacity Pipes

Every pipeline that carries natural gas also has a finite capacity in terms of what it can carry at a given time, regardless of supply and demand factors. Typically, we think more supply than demand will lead to lower prices—but if the pipelines are already at max capacity, your supply doesn’t matter much. You physically cannot deliver any more gas during that time because the pipe won’t fit any more. 

Different Markets, Multiple Pipes

Aside from the capacity of a single pipe, there’s also the number of total pipelines that are available. Some regions are serviced by multiple pipelines, which can create a level of optionality in how shippers plan to distribute natural gas. 

These options may make it easier for shippers to manage their transportation costs and schedules. Think of it this way: if you’re stuck in traffic due to roadwork, there may be a detour you can take to get to the same place—but some areas may only have one road that leads to that destination, similar to how some areas may only have one pipeline. 

Pipelines Not Flowing

Operational Flow Orders (OFOs) are sometimes used by pipelines to protect the system’s integrity at a given time. Pipelines or utilities may deploy an OFO in the case that there’s a cold winter, letting both shippers and customers know that there’s a limitation on the amount of physical gas they can use in order to prevent damage to the system. This can also happen during scorching hot summers.

Safety always comes first, and reliability is a close second. Shippers and customers getting outside of guidelines set with an OFO may be subject to cost penalties.

Changing Tariffs and Regulations

Just like how some roads have tolls, shippers usually have to pay to occupy the space on a pipeline as well as the natural gas itself. We’ve seen all kinds of updates to tariffs over the past few years which can impact energy prices and supply. Sometimes the cost to move the gas itself is subject to change.

Partner with Howard Energy, Inc. for Alternative Fuel Supply and Services

We’ve moved! Howard Energy is now located at 34 Thomas Ave, Brooklyn, MD 21225.

At Howard Energy, we fully understand how your business depends on a reliable and steady supply of gasoline and diesel fuel to keep your operations at its peak. As a family-owned, commercial full-service gas and diesel fuel supplier, Howard Energy has been serving companies across Maryland, Washington DC, and Northern VA for over 25 years.

Our team of experts has a thorough knowledge of the petroleum industry to devise commercial and retail fueling solutions. As a result, we use our keen insight to build strong partnerships with commercial trucking, construction, manufacturing companies, and more. Howard Energy is proud to bring our products and services to gas stations, car dealerships, marinas, and beyond – 7 days a week with no surcharge on holidays or weekends.

If you need cost-effective and convenient wholesale fuel and related fuel tank storage or monitoring services, contact us to get started. Call us at 410-647-1500, and visit our website. Stay connected with Howard Energy on Facebook, Twitter, and LinkedIn.

This entry was posted on Friday, April 15th, 2022 at 11:22 am. Both comments and pings are currently closed.