Volatility is on the Rise

Not only have prices increased, but they’ve also become more unpredictable. We measured volatility using the standard deviation of LBMP prices. We found that volatility has risen sharply:

• 2025 Volatility: 60.92
• 2024 Volatility: 43.51
• Year-over-Year Change: +40.01%

This indicates that energy prices are fluctuating more than before, making it harder for businesses and consumers to plan their energy expenses.

What’s Driving Higher Index Prices and Greater Volatility?

Several key factors contribute to rising energy prices and increased volatility:

• Weather-Driven Demand: Unpredictable weather patterns, including extreme cold spells or heat waves, can drive up energy demand.
• Energy Storage Challenges: Reductions in natural gas storage due to the colder-than-expected winter. Since natural gas serves both as a heating fuel and a marginal fuel for power generation, cold weather can have a significant impact on gas and power prices.
• Uncertainty: Supply chain disruptions, geopolitical tensions, the threat of tariffs on imported electricity and shifts in energy production can impact energy costs.

 

The Bottom Line for Financial and Energy Decision Makers

The energy market in NYC is experiencing a period of significant price increases and heightened volatility. For businesses and consumers, this means adapting to a more uncertain pricing landscape. Operating a business or organization through uncertain markets can create a sort of decision paralysis. Our advice is that you make energy market volatility work for you.

Assuming your business is operating well and is stable, you will always be able to make energy purchases well into the future. You don’t need to be passive and accept pricing delivered just months or weeks before your contract expires. Purchasing energy in advance before your current contract ends will allow you to take advantage of volatility rather than being subject to it. How do you know whether to buy? Well, if you’ve determined your risk appetite and budget targets, then you will want to look for products and pricing that meet those goals.

Whether through energy efficiency strategies, demand response programs, or hedging techniques, finding ways to navigate this volatility will be crucial in 2025 and beyond.