Natural gas

Be ready for heating costs to rise

Gas prices are expected to be volatile this year, but it’ll take time for those changes to hit consumers’ wallets. Utilities tend to work out long-term contracts with suppliers, which means not all price increases on the market will be immediately incorporated into bills.

But experts say if higher prices persist, they would be noticeable this winter. Certain regions of the U.S. would get hit especially hard, such as New York, Boston and other areas where pipeline infrastructure is constrained.

Yawger warned of a “really rough winter” if storage levels can’t catch up.

“Our natural gas bills have already started to go up. They’re going to continue to go up,” Yawger said. “You’re going to pay higher for air conditioning, you’re going to pay higher for heating. ... I think this is the way it’s going to be for a couple of years.”

The U.S. Energy Information Administration forecasts an 11% price increase for average U.S. residential electricity costs between December 2019 and December 2022.

“They might not see it in next month’s gas bill,” said Wood Mackenzie’s Kim. “But eventually, if these higher prices persist, then by the winter definitely you could see the high prices.”

Rubin added that natural gas is a “key” material for the larger economy, and its supplies and prices can have a domino effect on other products and industries already hit by inflation or the war in Ukraine – be it manufactured goods, chemicals or fertilizer.

Power blackouts or brownouts – moments when electricity providers ask customers to conserve energy or schedule a restricted flow of electricity when power demand outpaces supply – are another concern, Kim said.

Rubin said recent market moves from the Henry Hub, the U.S. benchmark for natural gas, hint that “wild price volatility” will continue throughout the rest of the year, with “enormous price risks in either direction.”

Yawger expects prices to hover between $3 and $4 per million British thermal units this summer – below the recent peak but above the prices seen in the spring and summer of 2020, when the Henry Hub was trading below $2.

“Our trough is going to be $3 to $4. That’s kind of scary. But it’s starting to look like that’s going to be the new reality,” he said.