Motorists may grumble if gasoline sells for $3 or more, but at least there’s no surprise when the daily price is posted on a sign for all to see.
Natural gas is subject to the same supply-and-demand dynamics as petroleum, but the typical consumer might not notice the price hikes until the heating bill arrives in the winter.
It will be a surprise and not a pleasant one.
“This will impact customers, communities and businesses,” said Scott Weitzel, vice president of regulatory and government affairs at Spire. “We’re definitely sensitive to that and it’s why we’re having these conversations now.”
In the first week of September, natural gas futures were selling at $7.84 per million British thermal units (MMBtu) on the New York Mercantile Exchange. While that’s down $1.83 from last month, the futures price is 115% higher than last year at this time and is expected to stay high through the rest of 2022. That’s a concern for agencies that work with low-income individuals and families that already are struggling with high food, rent and gasoline prices.
Nichi Seckinger, executive director of AFL-CIO Community Services, said agencies are worried about how much will be available for federal assistance and programs like the Low Income Home Energy Assistance Program, or LIHEAP.
“We already have a large population that relies on federal programs and LIHEAP,” she said. “This is going to put that much more of a strain on them.”
Many of the same factors that drove up gasoline prices this summer contributed to the rise in natural gas futures: rising demand, tight supplies, unpredictable weather and global instability.
Weitzel said prices were just starting to stabilize from winter storm Uri, the Arctic blast that roiled energy markets in February of 2021 when Russia invaded Ukraine a year later. The conflict disrupted European supplies and sent global prices spiraling upward. U.S. shipments of liquified natural gas have surged, helping make up the difference for Europe but further contributing to tight supplies and rising prices domestically.
To top it all off, more natural gas is used to generate electricity during summer heat waves because utilities are turning away from coal. Natural gas is a fossil fuel, but it burns cleaner than coal.
“It’s been a volatile gas market,” Weitzel said. “We’ve seen prices increase over the last year. It looks like that’s going to stick around for the coming winter.”
Spire, which serves 1.7 million customers in three states, expects to file for a purchase gas adjustment with Missouri regulators later in the fall. This filling allows the gas company to adjust rates to reflect the rising wholesale cost of natural gas over the previous 12-month period.
About 50% of Spire’s bill reflects the wholesale cost of natural gas, which is passed directly to the customer with no markup. The rest comes from taxes or rates set to recover the cost of delivery and infrastructure replacement.
Weitzel said the company tries to use hedging and storage contracts to minimize some of the effects of market prices, but he urges customers to go to www.spireenergy.com/assistance or local non-profits if they are having trouble with bill payments.
He said the good news is that prices are expected to moderate — but maybe not until next winter. The U.S. Energy Information Administration expects a key wholesale price to average $9 per MMBtu in the fourth quarter of 2022 before falling to $6 next year as domestic natural gas production rises.
“There’s hope on the horizon,” Weitzel said.