FPL Energy Natural Gas Prices Rising

Why Are Natural Gas Prices So High?

By RAY BUROW

The price of natural gas continues to rise in the United States and around the world. Unfortunately, the cost isn’t forecast to come down any time soon. The expectation is that the price of natural gas will continue to rise through the winter months. That’s, of course, bad news for residential and commercial customers since natural gas accounts for 34% of the energy consumed in the United States, according to the U.S. Energy Information Administration. In 2020, restaurants and other commercial interests used 31.15 trillion cubic feet of U.S. natural gas, accounting for 10% of the country’s 30.48 trillion cubic feet consumption.

The reasons behind the high price of natural gas aren’t arbitrary. The cost constantly fluctuates as the economy influences market supply and demand. Currently, the United States is experiencing an economic comeback following a short-lived recession brought on by the COVID-19 pandemic. However, there are still uncertainties surrounding the U.S. economy, and those are affecting prices.

Storage and distribution efforts also impact the price passed down to consumers. In the last year, natural gas saw a price increase above 180%. Customers who rely on natural gas to generate electricity may have noticed that the price of natural gas was the highest it’s been in seven years.

The fact that prices have risen sharply is troubling since the United States leads the world in natural gas production, but depleted supplies and increasing demand negatively affect cost. The country isn’t experiencing a natural gas shortage, but supplies are limited. Less fuel was stored following an increase in demand. Natural gas that would have landed in storage for the winter was used to meet summer consumption when air conditioners worked overtime.

Globally, demand for natural gas continues to skyrocket, stressing U.S. storehouses since the United States is the No. 1 producer worldwide. The Energy Information Administration reports that gas levels in U.S. storage are below the five-year average, falling 15.8% below last year’s levels. Additionally, there is a lower inventory of natural gas available because Hurricane Ida shut down nearly 80% of production in the Gulf of Mexico last year.

According to the U.S. Energy Information Administration, half or nearly half of households in the country use natural gas. Currently, supply can’t keep up with demand, and when this occurs, the price of natural gas doesn’t come down, but often the opposite is true. Consumers can expect natural gas prices to rise in 2022.