Natural Gas, Oil, and Gold In A Commodity Slump, Lowering Electric Rates

The 2008 Commodity Slump Lowers Electric Rates In Texas

Bloomberg wire reported that the whole commodity sector is in a slump especially now as Gold plunged more then $59 dollars today leading the overall slump from soybeans, wheat, cocoa and now crude oil. Natural gas has come down as well and as we all know in Texas electric rates will soon follow natural gas. The Fed has cut the overnight lending rate 75 basis points to 2.25 percent which is now the 6th reduction since September in a race to avoid a United States recession.

Why Would A Fed Cut In Interests Rates Lower Texas Electric Company Prices?

Part of the commodities price spike like with natural gas and oil had to do with the assumption that the Fed would atleast make a 2 percent cut in the lending interest rate which did not happen until now. This failed realization caused commodities to go haywire across the board. Everything from Soybeans to Natural Gas went way up. This caused Texas electric rates to reach a 3 year historical high.

Electric rates like these haven’t been seen since Hurricane Katrina when the weather destroyed some of Texas’ power generation infrastructure and pipelines. Investors not seeing the needed 2 percent adjustment stocked up on commodities as a hedge against inflation. Now that we are at a 2.25 percent cut in the lending rate investors have begun to pull out of their hedges and back into other investments. Commodities continue to go down and I would suspect that Texas electric rates for both residential consumers and commercial and industrial users will be back to their February prices.

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