Natural gas prices are surging and with winter approaching, consumers who heat with the fuel can expect rising bills. Even electric bills could rise since many utilities generate electricity with natural gas.
For years, natural gas has been plentiful and relatively cheap, but no more. Like many things in the economy, GasBuddy’s Patrick DeHaan says the move in natural gas prices is tied to Russia, which has interrupted its supplies going to Western Europe.
“Russia is one of the top suppliers of natural gas, and with them shutting down exports to Europe and limiting flows, natural gas prices have exploded,” DeHaan told ConsumerAffairs. “In addition, with economies reopening after COVID and power demand very high, demand for natural gas has been significant.”
Within days, Russia plans to close off one of Europe’s most vital fuel pipelines for an indefinite period of unplanned maintenance. Many industry sources see it as a retaliatory move in response to NATO’s support for Ukraine.
But the move will affect U.S. consumers. U.S. producers are stepping in to fill some of the void created by the Russian shutdown. At the same time, demand for natural gas in the U.S. rose over the summer in response to hot, dry weather in much of the Western U.S. The fuel wasn’t needed to heat homes but to meet additional electricity demand.
Consumers are using more electricity
The U.S. Energy Information Administration (EIA) reported Tuesday that electric power generated by natural gas-fired power plants in the lower 48 states reached 6.37 million megawatt-hours in mid-July. The agency reported demand remained strong despite rising prices. Making matters even more precarious for U.S. consumers, EIA reported that producers have cut back on their natural gas storage for the winter months.
“We are beginning to see a lag in storage builds that could lead to a precarious situation during the draw season in the event of a harsher-than-expected winter,” Neal Dingmann, an energy equities analyst at Truist Securities,” told the Wall Street Journal. “There is potential for a winter U.S. super spike.”
Natural gas is a widely-used fuel in American homes. In addition to operating furnaces, some households use the fuel to cook, heat water, and dry clothes.
According to the American Gas Association, the average U.S. household using natural gas paid a total of $670 a year for the fuel, an average of more than $55 a month. Industry experts say those bills are bound to rise this winter.