Natural Gas Prices set to Skyrocket this Winter Season
Americans across the country are going to be in for a surprise this winter when they receive their heating bills. Get ready to pay for sharply higher gas bills this winter, along with higher average costs on all other goods & services.
Around the world, prices for heating oil, natural gas, and other fuels have skyrocketed in recent months, and especially the last few weeks as demand is starting to grow for heating fuels. The U.S. Government has projected that it expects household heating bills to jump as much as 54% compared to last winter.
Nearly half of all homes in the United States use natural gas for heat, and it is estimated that each household could pay an extra $750 this winter, up 30% from last year. People who live in the Midwest could especially be impacted, with bills projected to be 49% more expensive compared to last winter. This year is expected to be the most expensive winter for natural gas heated homes since 2008–2009.
The second most used heating source for homes in the US is electricity, which makes up about 42% of the country. While electric heating costs aren’t expected to climb as high as natural gas heating costs, there is still a projected 6% increase, which comes out to an average of $1,300 in heating costs for the winter. Those homes that use heating oil, the least common method of home heating that makes up about 5% of the country, could see up to a 50% increase, or more than $500 to an average price of $1800 over the course of the season. It is predicted that the highest cost increases will fall on homes that use propane for heating, which accounts for many rural residents.
While we were in for a big surprise last winter with colder than ever forecasted temperatures in many regions of the country, this year is expected to continue in a similar fashion, with major freezes and temperature drops predicted for the season. The forecast is expected to be on average, colder than last year, so that means that most homes will be burning more fuel in order to stay warm, on top of the higher prices.
U.S. exports of natural gas have hit a record high this year, but because exports have grown at a faster rate than production, there is expected to be inventory shortages for domestic use. This inventory shortage is only one factor of the inevitable price increases, as the projected demand for natural gas is higher than available inventory.
The biggest reason for this winter’s higher heating bills is the recent surge in prices for energy commodities after they dropped to multi-year lows in 2020. Demand has simply grown faster than production as the economy roars back to life following shutdowns caused by the coronavirus.
Natural gas in the United States, for example, has climbed to its highest price since 2014 and is up roughly 90% over the last year. The wholesale price of heating oil, meanwhile, has more than doubled in the last 12 months.
Another reason for the rise is how global the market for fuels has become. In Europe, strong demand and limited supplies have sent natural gas prices up more than 350% this year. That’s pushing some of the natural gas produced in the United States to head for ships bound for other countries, adding upward pressure on domestic prices as well.
Heating oil prices, meanwhile, are tied closely to the price of crude oil, which has climbed more than 60% this year. Homes affected by those increases are primarily in the Northeast, where the percentage of homes using heating oil has dropped to 18% from 27% over the past decade.
Sources: US Energy Information Administration
Invest in a More Efficient Heating System
If your HVAC system is more than 10 years old, or does not meet the efficiency standards of today, then it may be time to start thinking about upgrading your current system to a newer, more cost-effecient model. With modern options like variable speed systems & ground source geothermal heat pumps, you can actually lower your average heating and cooling bills each month. Before heading into the winter season, we also recommend performing a home energy evaluation in order to have a good understanding of what your utility bills should be costing you.