Cookies help us deliver our services. By using our services, you agree to our use of cookies. Learn more

Spring Thaw or More Pain on Your Energy Bill?

Filed in:

Summary:

For several years now, the media story has been that fracking’s success increased the supply of natural gas dramatically, bringing down prices. Which in turn begs the question: why is my gas and electric bill skyrocketing and will it go down with the Spring thaw?

6937829026 D42b47111c M

For several years now, the media story has been that fracking’s success increased the supply of natural gas dramatically, bringing down prices. Which in turn begs the question: why is my gas and electric bill skyrocketing and will it go down with the Spring thaw?

Beginning with the obvious: for anyone living East of the Rockies, this winter has been a cold, snowy, never-ending experience. Since most of us use natural gas to heat our homes, a big part of the sticker shock in our utility bills comes from increased consumption, which ClearlyEnergy estimates to be at least 25% higher than last year for most households.

However, we forecast that the price paid for each unit of natural gas will remain stubbornly high in the coming months even as consumption subsides in the Spring.

Why? It’s a Supply and Demand story.

Boosted by fracking, the supply of natural gas has increased dramatically, up 28% in just seven years and far outstripping normal demand growth. As a direct result of this new found supply, natural gas prices fell in 2012 to their lowest levels in a decade, spoiling us with low utility bills. These low natural gas price levels prompted power plants to switch from high cost coal to low cost natural gas soaking up some of the supply and any excess gas was then stored away in a “rainy day fund”. In the natural gas world, the rainy day fund is really a snowy day fund where in the Spring and Fall natural gas is stored away in salt caverns and other geological storage facilities for use in the Winter heating season. Our epic Winter has required us to plunge head first into this storage and we have now depleted the storage to levels not seen in a decade. As a result, natural gas markets went into a tizzy and prices are up about 30% since last November skyrocketing utility bills.

Natural gas storage graph

How does that affect us, and how long will this last?

Price relief isn’t expected until the gas markets become confident that supply will catch back up and refill the stocks. In the Spring supply always exceeds demand, and with a mild summer, stocks could be full again by Fall 2014. But if Summer 2014 is a scorcher and natural gas power plants are used a whole lot to cover our air conditioning demand, it could take longer. This means that that the polar vortex will probably continue to haunt our utility bills for months to come.

Image from: http://www.eia.gov/naturalgas/weekly/

To receive new blog posts