An initial review undertaken by the Federal Energy Regulatory Commission suggests the spike in natural gas prices in the Northeast and elsewhere this week was “fundamentally driven” by market forces, rather than abusive practices, said the head of the agency’s Office of Market Oversight and Investigations (OMOI) Wednesday.

“We were following the developments” in the marketplace this week as prices climbed to determine whether “we were comfortable we could explain what was going on,” OMOI’s William Hederman told NGI. The staggering price increases were due to a mix of factors — low storage delivery, tightness of supply, overreaction on the part of gas buyers and bad weather, he said.

Despite the agency’s belief the price hikes were market-driven, Hederman said the Commission currently is preparing data requests to be sent to gas industry participants so it can “get a better sense of what was going on.” He was unable to say who would receive the data requests, or when they would be sent out by FERC.

In a related development, Senate Energy Committee Chairman Pete Domenici (R-NM) said allegations of price gouging in response to the steep rise in wholesale natural gas prices this week are based on “frustration, not facts.” He noted he was “extremely skeptical that there is any truth” to claims of pricing abuse.

“We’ve been down this road before. We were here two years ago. Prices were just as high, driven by rising demand and tight supply,” Domenici said, citing the single-day rise of 38% in wholesale gas prices earlier this week. “Now…we face the same scenario. In the interim, domestic production of natural gas has declined even further.”

Insufficient energy production “is our core problem,” while “allegations and rumors are just a temporary distraction,” the chairman said in a press statement. “If we want to stabilize prices now and in the future, we must produce more of our own natural gas. If we don’t, we will visit this scenario again and again,” as the crises in supply and price “will only get worse.”

Domenici agreed with industry experts who testified before the Senate Energy Committee Tuesday that “oil and gas supplies are tight because consumer demand is up, U.S. production is down and inventories are at record lows.” As in any free market, “when demand is up and supplies are down, prices soar,” he said.

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