(NEW YORK) — Even as U.S. households begin to enjoy relief from inflation woes, a spike in heating bills could crunch budgets this winter due to a rise in natural gas prices.
Nearly half of the nation’s households rely on natural gas for warmth. The price of the fuel surged last year following a jump in demand after extreme weather forced consumers to run heat and air conditioning more than usual, analysts told ABC News.
Exacerbating the greater need for natural gas, the U.S. suffered a dearth of supply as gas exports soared, analysts told ABC News.
Last year, the average price of natural gas reached its highest point since 2008, according to the U.S. Energy Information Administration, or EIA, a federal agency that tracks gas data.
The price was expected to climb even further this winter, increasing nearly 30% above where it stood a year prior, according to an EIA projection released in October.
“The prices people are paying for their heating bills right now are up enormously,” Eli Rubin, an analyst with EBW Analytics Group, told ABC News.
The sky-high prices are primarily due to a jump in U.S. gas exports in response to heightened demand from European countries that previously relied on natural gas from Russia, analysts told ABC News.
After Russia invaded Ukraine last February, those nations sought alternative sources of natural gas, including the U.S, they added.
“There was a huge shortage in Europe,” Rubin said.
In turn, the U.S. sent more natural gas for sale on the international market, leaving less available for U.S. consumption. When domestic demand outpaced supply, it sent prices soaring.
“There was a supply crunch,” Clark Williams-Derry, an energy analyst at the Institute for Energy Economics and Financial Analysis, told ABC News. “Essentially, we were exporting more and more natural gas and importing high prices as a result.”
As U.S. supply faltered, a bout of extreme weather increased the need for indoor air conditioning and heat, causing a jump in demand, analysts said.
Winter storm Uri, for instance, battered Texas with snow and sleet last February, besetting the Southwest with unusually frigid weather. The summer months, meanwhile, brought a string of dangerous heat waves across the U.S.
“We had a cold winter that flipped into a record-hot summer,” said Rubin, of EBW Analytics Group. “We used natural gas to fuel power generation to run everybody’s heat and air conditioners.”
That upward pressure on prices endured through the end of last year. The average price of wholesale gas rose 47% in December compared with the same month a year prior, said Williams-Derry, of the Institute for Energy Economics and Financial Analysis.
The price of wholesale gas has fallen over the last couple of weeks, however, as a warm spell assuaged fears of a persistent gas shortage, Rubin said.
Still, the recent decline in prices likely won’t offer relief for consumers this winter, since there’s typically a lag between a change in the wholesale price and the amount paid by the end consumer in his or her heating bill, he added.
Looking ahead, however, the outlook for U.S. prices appears bright, since the country is unlikely to experience the massive increase in gas exports that it endured last year, analysts said.
Over the course of this year, the price of natural gas is expected to moderate, offering relief for heat bills by the time next winter arrives, they added.
That rosy prediction requires caveats, of course, Williams-Derry said. A period of erratic weather or another supply crisis akin to the Russia-Ukraine war could send prices rising again, he added.
“All sorts of things can make the price do funny things, but all else being equal, we can expect an easing of last year’s record prices,” he said.
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