Upstate New York customers have had the advantage of cheap natural gas for a number of years; however, it’s likely that gas pricing will increase as pipelines, set to deliver shale gas to the New England market, become operational in 2017 and 2018.
Upstate New York customers have been able to purchase gas at more than a dollar discount to Henry Hub pricing (the pricing point for natural gas futures contracts traded at the NYMEX). If the price of Henry Hub is $4.00/Dth, it’s not uncommon for a New York customer to be able to purchase gas at $3.00/Dth. Customers here inherited this benefit because of their proximity to some of the largest and most competitive shale plays in the world – the Marcellus and Utica.
Over the last couple of years there has been a strong push by pipeline companies to expand the distribution of inexpensive shale gas to serve new markets – specifically the Northeast market where the price of gas is nearly double that of the New York market. In 2018 a number of pipelines will become operational and will allow more gas to flow eastward to the New England market. While this will dramatically reduce the cost of serving gas to the New England market, the market anticipates this flow shift to raise the cost of gas for New York customers. Despite this shift, New York customers will still maintain a reasonable pricing advantage over New England gas customers.