If you heat your home with gas, brace yourself for an expensive January
If you heat your home with gas, brace yourself for an expensive January
Not to start the new year off on a downer, but if you heat your home with natural gas, your next bill might be higher than you were expecting. Natural gas futures had their biggest single-day jump in three years this week.
Prices aren’t expected to drop anytime soon with days of bone-chilling weather on tap for the Northeast and Midwest.
“Natural gas, really and truly, is driven by weather more than anything else,” said Tom Seng, a professor of energy finance at Texas Christian University. “If this becomes a deep-seated, widespread, long-duration cold front, we’re going to burn a lot of natural gas, which means we’re going to pull a lot of natural gas out of storage.”
High demand, lower supply — that means higher prices. Also, we can’t know just how cold it’ll get and how long it’ll last. That uncertainty can lead the market to overreact.
But that’s not the only uncertainty the market’s facing right now.
“You add to that the war in the Middle East, the uncertainty in the Baltics, the war in Ukraine,” said Grant Wach, a professor of geology at Dalhousie University in Halifax, Canada. All that uncertainty makes people nervous.
“People could just be hedging in the next next few months to see what happens,” he said.
Econ 101 says that when demand increases, the way to keep prices stable is to increase supply along with it.
But that can’t happen quickly. It can take 18 months to bring a new gas well online, said Randy Albert, head of consulting firm Shale Advisory Group.
“When [President-elect Donald] Trump says, well, we’ll just ‘drill, baby, drill,’ that’s great,” he said. “But we don’t have enough takeaway capacity to get at the market.”
In other words, we don’t have the infrastructure to move the gas from those wells to where it’s needed. And the Joe Biden administration hasn’t been keen on letting the fossil fuel industry expand.
“There weren’t any signals being sent to producers and people who provide capital for drillers that say, ‘Hey, let’s go drill a bunch of wells.’ So we are where we are production-wise,” Albert said.
Long-term forecasts have called for a mild winter in most of the country, so prices could dip once the cold weather moves through. But long term, Wach at Dalhousie University is also worried about potential price spikes during a hot summer this year. Utilities will want natural gas to create the electricity to power all those cranked-up air conditioners.
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