The Price of Natural Gas Is Going Up. Here’s Why
Sept. 12, 2016 — Hot summer and reduced production putting pressure on price as winter approaches.
It’s a “perfect storm,” according to Informa Energy, a New Jersey-based energy consultancy. Back in December of 2014, there was a surplus of natural gas in storage. The mild winter of 2015-16 led to a drop in demand, which led suppliers to cut production and exploration, effectively wiping out the storage surplus. Then along came the scorching summer of 2016, which led to a spike in demand for electricity, most of which is generated using natural gas. A deficit of gas in storage is expected by November, just in time for the winter heating season.
“These conditions are creating a perfect storm in which already higher gas prices are predicted to double,” Informa Energy reports. “There is still a window of opportunity to lock in a low, stable gas rate before conditions change and the winter season is upon us. In this market, we are recommending a fixed-price contract as well as a multi-year option.”
A less dire warning was sounded by the U.S. Energy Information Administration (EIA): “A hot summer and production declines have put some upward pressure on natural gas prices. EIA expects natural gas prices to gradually rise over the forecast period (of 2017).”
So even if it doesn’t double, the price of natural gas is headed in one direction: up.