Americans are staring down increased heating costs as winter approaches
Home heating costs in the United States are expected to exceed usual costs this winter amid the growth of natural gas exports.
Natural gas, which is used in both home heating and electricity generation, is in particularly high demand as Europe seeks supplies from the U.S. and elsewhere following Russia’s invasion of Ukraine.
For American consumers, and Americans in the northeast in particular, that could lead to higher bills, experts say.
“It certainly appears that we’re going to continue to see relatively high natural gas prices in the U.S.,” said Harrison Fell, a senior research scholar at Columbia University’s Center on Global Energy Policy.
“We’re going to see higher bills for a lot of customers throughout the U.S.,” he added.
The country is already seeing high prices for natural gas this year.
The Energy Information Administration (EIA) — an independent statistics agency that’s part of the Energy Department — said Tuesday that prices have been significantly higher than they were a year ago.
Prices in 2021 were already relatively high, and this year, they have “exceeded the previous five-year range.”
The EIA said that in several months this year, spot prices for a key benchmark were “essentially double” last year’s price for the same month and pointed to increased exports of fuel.
“Record-high liquefied natural gas (LNG) exports, in particular, have been a growing source of natural gas demand. Since 2021, the volume of natural gas used to support U.S. LNG exports has exceeded the volume consumed in the commercial sector,” the agency said.
The U.S. has been increasing its exports of the fuel, largely to Europe to compensate for the loss of Russian natural gas amid its war with Ukraine. In the first half of this year, it became the world’s largest exporter of the fuel.
“The export of gas, primarily going to European markets, that’s going to continue, as Europe is really going to be in quite a bind this winter trying to get energy supplies,” Fell said.
Russia is the world’s second-largest producer of natural gas behind the U.S. In 2021, it provided about 40 percent of the gas consumed in the European Union.
But, that’s not the only factor driving up the price of natural gas.
There’s also a market imbalance because energy producers have not increased supply as much as they have done in the past to meet increased demand.
“Compared to years of the past, the supply response has been muted. We’re still growing our production, it’s just that it’s a lot more muted because producers are exercising capital discipline. That’s what the shareholders want,” said Eugene Kim, research director on Wood Mackenzie’s Americas gas research team.
In a follow-up emailed statement, Kim predicted that consumers could see a significant rise in their gas bills.
“Although the upcoming average winter Henry Hub gas prices are trading 20% higher than last winter, consumers should expect to see even higher increases in their gas heating bills,” he said, referring to a benchmark natural gas price.
“Utilities purchase gas during the summer injection season to store and withdraw during the winters when heating demand rises significantly. Summer Henry Hub gas prices are up by a higher 50% this year,” he added.
Prices also may not necessarily be the same across the U.S. Both Fell and Kim agreed that the Northeast may be hit hardest since it doesn’t have as much infrastructure such as pipelines.
“It’s not that the gas molecule is more expensive up in Boston or in New York, it’s just more difficult to get that gas molecule to serve the consumers up in New York and in Boston because of the lack of infrastructure,” he said.
In the long term, Fell said there are two things that would help bring costs down.
“The long run hope is a two fold approach: one would be to get a lot more electrification in the homes and to get the homes and commercial buildings to be a lot more energy efficient, particularly with respect to its heating and cooling,” he said.
“At the same time, we want to move our electricity grid in particular off of fossil fuels and into more renewable sources which are less prone to these geopolitical-driven price spikes,” he added.