Why Are Natural Gas Costs Rising?

Natural gas customers across the country will likely experience increased heating costs this winter due to a rise in natural gas market prices. While there is no single answer to why market prices are up there are a few key factors.

Low supplies of a commodity tend to drive market prices higher. Current supplies of natural gas are lower than normal because of long and short-term factors. 

Low market prices for crude oil over the past decade have limited investment in new oil drilling sites cutting down on the amount of gas produced. 

Further pandemic economic signals also limited investment in natural gas production and production has not recovered. 

Meanwhile supplies of gas in the U.S. have also been depleted as producers are shipping more natural gas out of the country to Europe which is facing a shortage of supply due to the Russia-Ukraine conflict. 

U.S. natural gas prices had been at historic lows since hydraulic fracturing (fracking) unlocked new supplies over a decade ago. Natural gas heating customers have benefited from the low natural gas market prices during that time. 

The graph included below illustrates trends in gas market costs beginning in 1998. In 2020 normal gas prices were around $3 per unit. Average prices were much higher in the early 2000s. Experts aren’t sure if we are experiencing a short-term price increase in 2021 and 2022 or a return of higher prices closer to historic norms. 

CFU will continue to control the costs we can protect customers as much as possible from market volatility and keep customers informed about the impact of energy markets on utility bills.

U.S. natural gas prices have been at historic lows since hydraulic fracturing (fracking) unlocked new supplies over a decade ago. The graph above illustrates the Henry Hub natural gas spot price for the past 24 years from the U.S. Energy Information Administration. While we are currently experiencing an increase in natural gas costs average prices were much higher in the early 2000s.