I am comparing at the money implied volatilities on current UK natural gas forwards for 2008/9 with historical volatilities (for similar delivery months in previous years and also the realised vols so far on the current forwards). The implied volatilities seem substantially higher (in the order of 1.2-1.3 times as much, even allowing for the increase in volatility as you near maturity) than the historical, and I am wondering how to explain this:- There is a genuine feeling in the market that future volatility will be this much higher.- A reflection of other characteristics (eg stochastic volatility, volatility clustering), in addition to the 'long term average' root mean square volatility which aren't captured in the standard Black model, but when the revised model prices are 'translated' back into Black volatilities, results in these being higher than the averages.- Something else I've missed.Any help/thoughts would be much appreciated. Apologies if this has been discussed elsewhere, but I couldn't find anything when I searched.

The short answer is that volatility is much higher now than it's ever been. WTI oil futures, for example, recently had their biggest one-day move ever two days in a row. If you expect the drivers of this volatility to persist, implied vols should be higher than historical vols.

Thanks rmexico, that's useful to know.