[MRM]

Of course all the gas produced is used. If it wasn't, we'd either start drowning in it or they would have to stop producing it.

The secret is that supply and demand create the price. If the price goes down, more people buy and use gas, increasing demand. If prices go up, people and businesses consume less, creating less demand. It doesn't matter if the demand is created by people filling their tanks, industrial giants using it for manufacturing, or Lehman Brothers buying billion dollar contracts for investment purposes, when demand increases prices increase to match.

Gas demand is pretty inflexible in the short run. In other words, if the price goes up, it is hard to decrease demand quickly, so we're subject to price hikes without demand decreasing quickly, which would put the supply and demand back in whack, reducing prices. That's why you can see huge runups in prices without much seeming to change. But in the long run factories will convert to cheaper forms of energy, people and industry will conserve, and demand will go down in response to the higher prices.

The unknown equation is to what extent new demand for gas is coming on line in the developing countries. If there is substantial new demand just starting to happen, then we have what is called a demand shock, which will send prices higher on a fundamental level. If you think that's happening, or is about to happen, and you're a trader, you might take a lot of long term contracts betting that the price of oil and gas will stay high and go higher.

My personal thinking is that there is a fundamental increase in demand, but that prices have gotten out of whack in the short term, and there will be an oil bust when our conservation efforts start to bear fruit, followed by inevitable and never ending incremental increases in price as the developing world comes on line.