Staying Home Costs More, Too, As Natural Gas Prices Rise

Cold winter weather and tension between Russia and Ukraine are factors

Man Adjusting Thermostat
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It’s not your imagination. You’re likely paying more this winter not just to go out but also to stay home: The price of natural gas is up and so is the cost of heating homes, and analysts are saying get used to it.

Natural gas prices, based on contracts for March deliveries, have soared about 27% so far this year. Though Thursday’s price of $4.92 per million British thermal units is off its peak this year near $6.27, it is still more than double pre-pandemic prices.

Consumers are probably already feeling those price increases in their monthly energy bills. Natural gas is used in about half of U.S. homes for everyday activities like cooking, drying clothes, and heating homes and water. In 2020, the residential sector accounted for about 15% of total U.S. natural gas consumption, and natural gas was the source of about 23% of the U.S. residential sector's total energy use, according to the Energy Information Administration.

“The average $4 btu is probably here to stay,” said Campbell Faulkner, senior vice president at commodities broker OTC Global Holdings. “That’s significantly higher than what we’ve seen over the past few years. So expect to keep paying more for heating and electricity.”

The jump in natural gas prices stems from a myriad of factors including tight supply, harsh winter weather moving across the U.S., and geopolitical tensions. The EIA reported on Thursday 2,323 billion cubic feet of working gas in storage for the week ending Jan. 28. That was down 268 Bcf from the prior week and 393 Bcf from last year at this time, and it is 143 Bcf below the five-year average. Meanwhile, winter storm Landon was expected to hit the U.S. with snow, sleet, and freezing rain from the Rockies to the Plains and Midwest and through parts of the Northeast through the end of the week. 

Additionally, natural gas prices are being buoyed by escalating tensions between Russia and Ukraine. Russia is the second-largest natural gas producer in the world after the U.S. but it’s the main supplier for Europe, accounting for more than 40% of Europe’s natural gas. Russia has been amassing troops near the border of Ukraine, and if fighting breaks out, the U.S. has said it and other countries would help supply Europe with natural gas to smooth out any disruptions that might occur. 

Have a question, comment, or story to share? You can reach Medora at medoralee@thebalance.com.

Article Sources

  1. Yahoo Finance. "Natural Gas." Accessed Feb. 3, 2022.

  2. Energy Information Administration. “Natural Gas Explained.” Accessed Feb. 3, 2022.