Natural gas prices are the main function of supply and demand because due to its limited available alternative. Factors That Affect Buyer/Supplier Decision. If small changes occur in the supply and demand of t natural gas, it will results in huge increase in its prices. There are different risk factors which affects the prices of natural gas supply.
The seasonal weather which includes the storms has the huge impact on the production of natural gas. During such storms, it forces the refineries to shut down or slow down their production and these storms have the great threat for the works and facilities used in the process. Hurricane storms have the huge impact to shut down operation of natural gas production in mid 2000 in gulf coast countries due to which total production of gas decrease to 4 present. This risk factor disturbs both buyers and suppliers due to the change in prices. Rather in the normal weather season fall and winter, it leads to decrease in price due to which the whole supply and demand curve changes. In the case of MFB, Prices were unstable before the Contract comes to renew that is why they were not finding a suitable supplier to fulfill their need (Thomas, 2015)
The economy of a country grows the prices of natural gas also becomes higher. Countries with strong economy shows good growth especially in the industrial and commercial markets demand of these resources spikes. Companies demand increase to manufacture their goods and services due to which the demand increases from the supply of natural gas. Due to this sudden change in demand the price increases invariable. Natural gas is not used only in the food and beverage companies only, but it also use in the pharmaceutical companies too. They use butane, ethane and propone to produced consumer heath products. Some of the industrial companies use gas as a cleaner burning fuel. Gas is used at higher level in their fertilizer companies to heating and cooling their systems (Thomas, 2015).
Mostly companies and industries use natural resources to run their operation depending upon the availability of resources and suitable price. Every company wants to use the cheapest fuel to cut down their manufacturing costs. This is all due to their inter-related nature of fuel markets. For example, a shift in the electricity to coal will becomes a decrease in demand of natural gas. As the demand of natural gas fall the prices will also be fall. Due to the large volume required of natural gas even a small change in the price of natural gas also has a noticeable effect on its demand (Thomas, 2015).
Crude oil prices can also influence the use and price of natural gas. If the prices of crude oil per barrel raise cost of the products manufacturer and refineries also increase. With the increase in the price of the gasoline consumers adjust their buying strategies according to the situation. Business which use crude oil for their process come back to the gasoline, due to which it will become a cause in increase in price of the natural gas (Thomas, 2015).
The cost of maintaining the natural gas can also influence the price for the consumers. Because natural gas is store underground supply chain system to delivering natural gas to provide companies, different business and homes throughout the year. If business and industries shifts their business towards crude oil thus it mean more time is required to store the natural. Defiantly storage will consume cost which results increase in it prices (Thomas, 2015). Factors That Affect Buyer/Supplier Decision
The above mentioned are the risk factors which affects the buyer or supplier decision to finalize the contract prices because due to these risk factors the supply and demand of natural gas change. According to the basic law of supply and demand prices of natural gas may increase and decreased. Due to this fluctuation in prices company’s decisions may vary to run their manufacturing process according to price fluctuation to meet their budget. There are many factors which will affect the buyer or supplier decision to selection a contract type or contract duration. Factors That Affect Buyer/Supplier Decision
Due to the seasonal change in the natural gas prices companies are more interested to select the fixed price contract for a specific time period. This contract type needs to understand the change in prices on the basis on the past data. The price analysis will give us the deep understanding about the factors which may cause a change in price. This price analysis will enables us to finalize the favorable price for their business (N/A, Factors in selecting contract type).