This Winter, Expect Lower Bills for Natural Gas Customers
Last winter saw elevated energy costs following a perfect storm of extreme cold, global disruptions from Russia’s invasion of Ukraine, and market disruptions still echoing from the Covid-19 pandemic. This winter, however, relief has arrived for many customers in the form of lower bills for natural gas.
Since the Shale Revolution of the mid-2000’s, America has typically seen prices that are a fraction of what natural gas customers pay in most other countries. (One exception to this is New England, which has made policy decisions to avoid adequate connections to the broader American natural gas delivery system, relying on LNG imports at prices more in-line with those paid by their European or Asian competitors). Last winter, American prices rose to almost $10/MMBtu – only a tenth of the peak European prices for natural gas, but still more than four times what natural gas cost in the United States in early December 2023.
The decrease in this winter’s natural gas prices is significant. According to this year’s annual American Gas Association Winter Heating Outlook, lower natural gas prices this year mean that home heating prices are expected to decline by an average of 21% year-over-year from 2022 to 2023, thanks to an anticipated 45% year-over-year decline in U.S. natural gas prices as measured at the Henry Hub. This is according to AGA’s analysis based on U.S. Energy Information Administration data and includes all heating costs, not just those associated with natural gas furnaces. (Natural gas prices also contribute to electrical prices, as more than 40% of power in the United States is generated from natural gas).
The Winter Heating Outlook also suggests the situation is even brighter for customers who heat with natural gas instead of electricity. According to the report, households can save between 34% and 72% with natural gas compared to many popular electric alternatives. Homes and businesses already using natural gas for space heating can further cut costs by 17% this winter by installing a high-efficiency gas furnace.
America is well suited to keeping prices low. The U.S. is the world’s largest producer of natural gas, and the competition isn’t even close. Recent data shows the U.S. is on track to produce more than a trillion cubic meters of natural gas in 2023, more than 300 billion cubic meters more than Russia, and almost quadruple what Iran, the third largest producer, manages. This means that not only are we able to produce plenty for our own needs, but also that we can supply our allies abroad. The U.S. is now the largest LNG exporter and is poised to rapidly expand capacity. This isn’t just good for democracies worldwide – it’s also a win for efforts to reduce emissions.
Germany is an excellent example of this process in action. Because American producers are the most efficient on the planet, U.S. LNG can be up to 37% lower emission in German power markets compared with Russian pipeline gas. As we occupy an ever-larger share of global production, we’re helping our allies to lower emissions while preserving their economies.
Both American customers and our allies abroad are benefiting from lower natural gas prices. Thanks to technological innovation and abundant reserves, Americans will reap the benefits of this for decades to come.