'Tis the season … the heating season that is. That means American households will now have to allocate a larger portion of their monthly budgets to the purchase of heating fuels, typically either natural gas or heating oil. And it should not surprise anybody that when demand for heating fuels rise, the prices paid for fuels also rise. We should expect a seasonal increase in the prices paid for heating fuels when the weather turns cold.
I have monitored the trends in the price charts for crude oil, heating oil, gasoline and natural gas for many years. These commodities are excellent indicators of overall economic activity and consumer spending patterns. They also provide valuable insight into how demand for many plastics products is changing and where it will likely go in the near future.
These trends are also important to processors, compounders and distributors because they impact the future trends in the prices for most plastic resins. Throughout most of the history of the data, there was a very tight relationship between the price of crude oil and the price of resins. This relationship has loosened recently due to the burgeoning use of natural gas as a raw material. And I think it is safe to conclude that the impact the natural gas industry has on the plastics industry will continue to increase in the future.
If you look closely at the chart, you can see that there is usually a small but distinct seasonal rise in the price of natural gas in the fourth quarter of each year. But, occasionally, the prices for heating fuels will spike up much higher than expected. Market analysts call this a "parabolic move," and the natural gas market is renowned for its ability to go parabolic. That's what happened in the winter of 2013-14, and it looks like it could happen again this season.