As quickly as the summer arrived it has begun to slip by even faster. In fact, it is hard to believe that today is the first of August. And for the nation it seems that August has brought with it three things: hurricanes, heat waves and rising natural gas prices.

This was never more apparent than on Monday when natural gas prices spiked to their highest levels in nearly six months as a stifling heat wave gripped much of the nation.

Natural Gas prices, it seemed, rose as fast as the mercury yesterday as natural gas futures rose a stunning $1.02 or 14% to a close of $8.211 per thousand cubic feet. This amounted to the largest increase since December and the highest closing price since February of this year.

The dramatic increase came as hot weather across the nation increased the demand for natural gas generated electricity.

As consumers everywhere turned down their thermostats in an effort to combat the stifling heat they continued to tax the nation's delicate power grid. Doing so, they furthered the upward trend in demand that had begun nearly two weeks earlier.

In fact, Edison Electrical Institute reported last week that U.S. electrical demand over that time had actually been record setting. According to EEI, domestic utilities delivered 96,314 gigawatts during the week of July 22. This figure easily beat the prior record set a year earlier by 1%.

This record setting demand, however, came at a distinct price. Supplies naturally fell as demand rose with the temperatures. In fact, the Energy department last week reported an unexpected decline in natural gas inventories.

This represented a surprising reversal considering inventories historically tend to build over the summer. This further steepened the rise in prices.

On top of everything else, Mother Nature stepped into the picture again, this time with the threat of a hurricane in the Atlantic Basin. Tropical Storm Chris formed over the weekend and now spins off east of the Leeward Islands.

With its winds currently blowing at 40 mph Chris is expected to intensify. Numerous computer models have predicted that it could spin its way into the energy important Gulf by early next week.

This could have the effect of pushing prices higher going into next week and it underscores the nation's vulnerability to storms that was painfully unmasked in the wake of hurricanes Katrina and Wilma last year.

You may remember them.

Not only did these storms devastate New Orleans and the Gulf Coast but they wreaked havoc on the price of natural gas due to the unbelievable amount of damage they inflicted on the natural gas producers themselves. In the aftermath of these storms prices leaped into the $15.00 range.

These types of disasters are not easily forgotten by anyone let alone the markets. The National Oceanic & Atmospheric Administration anticipates this hurricane season to be highly active also. It projects there to be between 13 to 16 named storms this season with 8 to 10 becoming full fledged hurricanes. Of them, 4 to 6 could become major hurricanes reaching category three of higher.

Any one of these predicted storms could revisit production difficulties into the marketplace.

All of this has come on the heels of unusually lower prices. Going into July, gas prices had generally been between $5.90-$7.30 per million British Thermal Units (MMBtu). This was due in large part to the mildest winter in the last fifty years.

Natural gas, in fact, seemed to bottom recently at around the $5.55 level. But the arrival of August has changed the scenario as it usually does

August after all doesn't simply represent the beginning of the end of summer. It also represents the peak of the season's hottest weather. This naturally plays itself out in terms of supply and demand due the nations need for air conditioning.

Additionally, it also tends to be the beginning of the season for the year's most devastating hurricanes. Rising water temperatures begin to peak during the month and continue on into September. These warmer waters provide the fuel necessary to create the season's most destructive storms.

As such, August by and large tends to be the month that Natural Gas makes a move to the upside.

Take a look at the chart below:

As you can see the rise in natural gas prices recently experienced closely matches the move in price that occurred at roughly the same time last year.

And at a current level of around $7.60 a case can certainly be made that higher prices are entirely likely as we head on into the fall.

To underscore this point even further consider the effect of oil prices on natural gas. Beyond sweltering heat and storms, a fundamental case can be made also for a further rise in natural gas.

Oil and gas after all are the two inseparable twins. Historically these two commodities have been joined at the hip.

In fact, over time, natural gas trades on the NYMEX at 75% of the crude oil price on an energy basis.

Since a barrel of oil contains 6.09 million British thermal Units of energy, this translates into a cost of $12.31 per MMBtu with oil priced at $75/ barrel.

Following the historical trend of oil to natural gas this calculation plainly suggests the price of oil should be roughly $9.23 per MMBtu. (75% of the spot price of $12.31/MMBtu)

Considering these facts, look for natural gas to move higher heading into the fall. With natural gas trading today at the $7.57 level a move on into the $9.00 range is certainly foreseeable.

But don't wait to make your move. This summer is flying by.

Enjoy it while you can. It won't be long before the frost is on the pumpkin.

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