From the WSJ ($$ - Low demand keeps natural gas cheap):
Frigid temperatures and winter storms have blanketed the country from New Orleans to Chicago this month, weather that usually leads to a spike in the price of the most popular fuel for home heating, natural gas.
But not this year.
Natural-gas prices remain in a slump because manufacturers, which are even bigger users of gas than chilly homeowners, have cut back their operations in response to the recession. And low demand means low prices.
The article goes on to detail some competing microeconomic effects:
- The recession is keeping the demand for manufactured goods low, which reduces the demand for natural gas, keeping its price low.
- Consumer demand has increased due to colder than normal weather
So far, #1 is greater than #2 and prices are low. As a result, the lower natural gas price is helping consumers, who are able to purchase more down along their inelastic demand curve (a change in quantity demanded).
