Another Year of Market Volatility

It will again be a volatile year for the energy sector — which may mean rising prices for consumers. While Russia’s invasion of Ukraine has affected volatility across the globe, leading to an energy crisis in Europe, our domestic turbulence stems from several years of rapid growth that resulted in significant price inelasticity.

In fact, the U.S. energy sector is still bouncing back from production and storage challenges that started even before the COVID-19 pandemic. Additionally, while the industry has grown tremendously, our natural gas storage capacity hasn’t kept up.

The resulting lack of flexibility in the domestic energy sector means we can expect to see a continuation of the market volatility — and price instability — that we’ve seen in both gas and power prices since mid-2021. While the World Bank predicts that global natural gas and coal prices are expected to drop in 2023 — after hitting record highs in 2022 — energy prices this year will still be 75 percent above the average over the past 5 years.¹

Meanwhile, in Europe, natural gas prices could be nearly four times higher.

Ultimately, volatility — and prices — will be impacted by unpredictable weather, and we likely won’t know the true impact on the market until the spring. Wholesale electricity prices at major power trading hubs are predicted to be about 20 to 60 percent higher on average this winter, with the highest wholesale electricity prices likely to be in New England, because of possible natural gas pipeline constraints, reduced fuel inventories for power generation, and uncertainty around liquefied natural gas (LNG) shipments given global supply conditions.