Natural Gas Prices are How High?

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I am wearing a down parka, inside. I am washing my clothes in cold water. I don’t use the gas stove and I haven’t used the gas oven in 3 years (afraid to try the self-cleaning feature). I limit the heat and length of time using the clothes dryer.

I am limiting long hot showers to short warm showers. I keep the thermostat at 68 degrees. 

The only thing I haven’t done is turn down the heat on the water heater, I may need special gloves for that.

I am doing everything the gas company says I should do to reduce my gas bill.

Why? My gas bill over the last 12 months has tripled and today I received a notice from the gas company that we should expect the gas bill to go up by $200.00 in the month of January.

In dollars this means if I paid $100 in December of 2021, I paid $300 in December of 2022 assuming I used the same amount of gas. Now in January 2023 a 70% increase means I will pay $510.00 for the month!

I sat down and reviewed my gas bills for the last 4 Decembers, my usage has been consistent.

Slightly higher or slightly lower. No dramatic increase in usage that makes it easy to say: “Oh yeah, I can cut way back.”

There is NO WAY I can reduce the amount of natural gas I use that would even make a dent in the cost.

Nothing I do is going making a difference when prices are exorbitant. I find that infuriating.

The gas company has graciously decided that your service will NOT be turned off if you can’t pay your bill on time. They have expressed concern that people living in higher elevations (think snowcapped mountains) may freeze to death trying to reduce their use of natural gas.

Of course people are going to freeze to death, knuckleheads. The cost of gas is increasing at a rate that is too high for anyone to offset simply by cutting back.

So I did what I always do, I start reading everything I can about the natural gas markets. I am skeptical about the reasons the gas company is giving for the cost per thermal unit.

It isn’t they are wrong. It just seems like there are pieces of the puzzle missing.

“According to the US Energy Information Administration (EIA), a number of factors are contributing to higher natural gas commodity prices. 

• Widespread, below-normal temperatures on much of the West Coast, including Washington and Oregon;
• High natural gas demand for heating by customers in areas with below normal temperatures;
• Reduced natural gas supplies to the West Coast from Canada and the Rocky Mountains;
• Reduced interstate pipeline capacity to the West Coast because of pipeline maintenance activities in West Texas; and
• Low natural gas storage levels on the West Coast.

A detailed report about these market conditions can be found here: https://www.eia.gov/naturalgas/weekly/”

There is more to the story.

Of all the natural gas produced in the U.S., natural gas for residential usage is 15%.

Does this mean that 15% of the population can drive down the cost of natural gas? Not possible.

Where is the rest of the natural gas used? 

37% is used for electric power.

Use of energy in explained – U.S. Energy Information Administration (EIA)

The US became a net EXPORTER of liquid natural gas in 2017.

Natural gas imports and exports – U.S. Energy Information Administration (EIA)

“Natural gas exports reached a record high in 2021

Until 2000, the United States exported relatively small volumes of natural gas and mostly by pipeline to Mexico and Canada. Total U.S. annual natural gas exports generally increased each year from 2000 through 2021 as increases in U.S. natural gas production contributed to lower natural gas prices and the competitiveness of U.S. natural gas in international markets. Expansion of the natural gas pipeline network, notably in the Permian basin area of Texas, enabled an increase in the capture of associated natural gas from oil wells, which helped to increase total production in 2021 and contributed to increases in U.S. natural gas exports. In 2021, the United States exported natural gas to 39 countries.

In 2021, total annual U.S. natural gas exports were 6.65 Tcf—the highest on record, and the United States has been an annual net exporter of natural gas since 2017.

About 46% of the total U.S. natural gas exports in 2021 were by pipeline, of which 70% went to Mexico and 30% went to Canada. Exports of LNG increased substantially each year from 2015 through 2021, coinciding with large increases in export capacity. 2021 was the first year that U.S. LNG exports exceeded pipeline exports of natural gas since 1990.”

Tcf is trillion cubic feet.

Should we continue to export if we do not have enough supply to meet demand? “We” don’t have any control over exports.

This brings me to price. Prices for natural gas are set in national and regional areas. Depending on where you live and factors like weather or electricity use, you may pay more or less for natural gas.

I wish I could say higher prices are a simple demand and supply issue. Nothing is simple. 

Commodity prices are notoriously volatile. If I can’t reduce my gas usage, is there anyway to hedge the price increase through investments? Commodity futures contracts are one way and the market for Natural Gas futures is one of the largest in the world.

Are futures contracts a good idea? Only if you are willing to put money at risk, sit in front of trading screens all day and can stand the huge price swings. 

The best outcome is a heat wave in the middle of winter.

Or the gas company takes some major losses and does not pass on the higher costs to consumers.

Not too optimistic about either scenario.

Did I mention the electric heating pad?

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