Physical Natural Gas Market 

Evidence of Health 

NGSA members enter into thousands of physical market transactions daily and invest billions of dollars in the long-term 

development of natural gas supply for sale in the U.S. natural gas market. As large producers and marketers of natural 

gas, NGSA members would not be participating in the physical natural gas market if they did not believe the market 

exhibited three key bedrock principles fundamental to health: 1) integrity, 2) transparency and 3) efficiency. Evidence of 

physical market health abounds and provides the foundation of NGSA’s continued belief that there is no need for 

additional government intervention in the physical natural gas market. 

 

Integrity. A number of regulatory and legislative changes provided confidence and trust in natural gas markets. The 

first step to improve the integrity of indices was the Federal Energy Regulatory Commission (FERC) 2003 Policy 

Statement on good faith price reporting and publishing (Docket No. PL03-3) followed by the 2006 Rule Prohibiting 

Market Manipulation (Order No. 670). Further bolstering integrity and oversight, FERC has recently implemented a 

memorandum of understanding with the Commodity Futures Trading Commission (CFTC) to share market oversight 

information, and made public its Market Oversight webpage for timely, free, and unbiased energy market data. Finally, 

Section 316 of the Energy Policy Act of 2005 

(EPACT) directed FERC to facilitate price 

transparency spurring FERC’s Market Transparency 

NOPR as the culmination of a series of efforts 

designed to provide confidence in the price 

reporting process. 

Transparency. Statistics support the market’s 

evolution toward increased transparency. The 

charts on the right show that the level of reported 

volume and number of transactions captured by 

competitive index publishers has roughly doubled 

since January 2004. This illustrates two key points: 

1) an upward trend toward increased transparency 

and 2) the market’s response to improving 

transparency. In addition, market participants are 

exploring additional innovations such as a 

voluntary, non-government energy data hub. 

Further, commercial entities provide the market 

with the majority of the benefit of physical market 

fundamentals data (supply and demand) through 

the reporting of scheduled volumes, flow-tracking 

and estimation services. 

Efficiency. Efficiency means that price reflects, and 

is sensitive to, changes in information on supply, 

demand and other market fundamentals. The 

natural gas price decline since the winter of 2005 

illustrates the natural gas market response to 

changing short-term supply and consumption patterns. Today, natural gas prices are responding to relatively stable or 

increasing supply, high storage inventories and lower shoulder month consumption illustrating natural gas market 

efficiency. 

As the physical natural gas market continues to evolve, regulators should continue to assure a stable, predictable 

regulatory environment that encourages market participation and maintains market efficiency. Recent history illustrates 

that markets evolve naturally and that market forces spur improvements to the available information within a market 

more quickly than government, and without the risk of inefficiency. In a transparent and efficient market, additional 

regulatory requirements could be counterproductive and risk harming existing market efficiency. Continued ease of 

participation in the market, coupled with access to more domestic natural gas resources, will allow the U.S. energy 

market to grow with the U.S. economy.