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Why Are Natural Gas Costs Rising?

Posted on Wednesday, October 27, 2021

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.

Natural Gas Supply
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 COVID-related economic signals also limited investment in natural gas production. 

Meanwhile, supplies of gas in the U.S. have also been depleted by 2021 weather events such as the February extreme winter storm across the Midwest and South. The summer was very hot in the West, which meant more gas than normal was needed to produce electricity. And fall hurricanes forced the Gulf of Mexico’s gas output offline. In addition, European countries are experiencing a gas shortage, so exports from the United States are up.  

Tracking Historic Trends
U.S. natural gas prices have 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. 

Last winter, 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 or a return of higher prices closer to historic norms. 

NG Costs

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.