NEW YORK - Natural gas prices rose Wednesday as scorching temperatures that baked states in the Northeast and the Midwest put pressure on the nation's electricity grids.
Crude oil and gasoline prices also rose sharply after a government report showed that U.S. crude and gasoline inventories fell last week, and as a tropical storm gained strength in the Caribbean.
Air conditioners in the United States have been stretching the capacity of national electricity grids and driving up the price of natural gas - the lifeblood of many power plants. By midafternoon on Wednesday, Washington hit 98 degrees, New York 101 degrees, Boston 98 degrees, and Chicago 95 degrees, according to the National Weather Service.
When electricity use rises above normal levels, natural gas is the main fuel that utility companies use to run the extra turbines to meet demand.
''You've got a national heat wave coast to coast, and natural gas is the fuel used for peaking electricity demand,'' said Jim Owen, a spokesman for the Edison Electric Institute, a Washington-based trade group.
Natural gas rose 22.5 cents to settle at $7.799 per thousand cubic feet Wednesday on the New York Mercantile Exchange, after soaring as high as $8.545.
That contract had surged 14 percent on Monday to settle at $8.211, the highest close since early February, and then fell about 8 percent on Tuesday. They are still well below their all-time high above $14 reached in October.
''The volatility has been spectacular,'' said Fimat USA analyst John Kilduff. He added that while prices have been ''a little overblown,'' they could certainly rise further if Thursday's natural gas inventory report shows a drop, or if Tropical Storm Chris turns into a hurricane as expected and heads toward the Gulf Coast.
If natural gas prices remain high, the cost to the utility companies will probably trickle down to consumers' electric bills, Owen said. How much depends on state regulations and whether the utility is locked into a long-term contract. Generally speaking, ''every state has a different mechanism for allowing these prices to go into the system,'' he said.
Wednesday morning, the U.S. Department of Energy said crude oil inventories fell by 1.8 million barrels in the last week of July to 333.7 million barrels - still 4 percent above levels a year ago.
Gasoline inventories slipped by 100,000 barrels to 210.9 million barrels, and are just about 1 percent above year-ago levels.
Distillate fuel inventories rose by 700,000 barrels to 132.6 million barrels.