Expect to pay more (a lot more?) for natural gas

Photo: A href="http://www.flickr.com/photos/lavagabunda/3619025002/">Sandra Cuffe, Creative Commons, some rights reserved

Photo: Sandra Cuffe, Creative Commons, some rights reserved

The supply and price of natural gas is buffeted by local factors and global markets. Between those two pressure points, natural gas prices are suddenly on the rise.

Two weeks ago an In Box post mentioned that a major supplier of natural gas in Ontario had submitted a request to raise consumer prices by 40%. Well, that entire rate hike was just approved by the Ontario Energy Board, effective April 1st.

From CBC:

Customers of Enbridge Gas will soon be hit with an average increase of nearly $400 a year in their gas bill, at least on an interim basis.

The Ontario Energy Board approved the company’s application to boost its rates by 40 per cent.

Enbridge said the higher costs are the result of colder than normal weather over the past winter and higher natural gas prices forecast for the next year.

But in its decision, the energy board said that these rates, which come into effect April 1,  are approved on an interim basis, meaning they could be adjusted in the future.

OK, that’s Enbridge and soon-to-follow suppliers in Canada. And it’s an interim approval, subject to future adjustment. But this will likely show up in everyone’s wallet, soon enough. Here’s some discussion about that in an op-ed from Jim Hillibish a staff writer for CantonRep.com, in Ohio:

We all will pay for what’s happening. Natural gas prices are mushrooming. In 2012, they fell to below $2 per 1,000 mcf wholesale, a record. That has more than doubled to a recent $4.80 and will keep rising, according to BHP Billiton, a major gas producer.

The residential price can be double the wholesale. U.S. Energy Department forecasts the average residential price will spike to $11.56 per mcf by the end of the year. That’s a boon to drillers — but a budget buster for consumers.

Another shocker: Unlike earlier shortages, there is no refuge in electricity, as more of it is being generated by natural gas.

But apparently that’s not enough for the industry, which is lobbying Congress to allow increased exporting of our gas, which is liquefied for ship transport. That means billions more for export-processing infrastructure.

Looking at this from a market perspective, natural gas prices do fluctuate. There’s nothing permanent about the lows consumers have been enjoying, indeed prices were higher – quite a lot higher – not too many years ago, as can be seen in charts from the OEB.

The political aspects of natural gas are especially dynamic right now. From the Washington Post:

But many members of Congress are pressing the Obama administration to use energy as a diplomatic weapon and to speed permits for natural gas export terminals to ease Europe’s and Ukraine’s heavy reliance on Russian supplies.

It isn’t that easy. The cost of getting U.S. gas supplies to Europe and the lack of infrastructure on both sides of the Atlantic are major obstacles. Plus, Asian customers are offering higher prices. Opponents of gas exports (including consumer groups and petrochemical companies) say that some businesses and politicians are using the Ukraine crisis as an excuse to export. Proponents, by contrast, complain that the Energy Department is dragging its feet.

And, sooner or later, energy extraction, supply and use also come down to real and important environmental issues.

Taken together, natural gas is really making news.

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13 Comments on “Expect to pay more (a lot more?) for natural gas”

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  1. Paul says:

    This is my fault. I switched my house to Natural Gas this year. Sorry.

  2. SESZOO says:

    Wasn’t the excuse for the pipeline they just put through St. Lawrence cty and the natural gas supposed to be and stay a lot cheaper than other types of fuel. Or was that just an excuse to get it built? We don’t use it ,but our school is hooking in to it ,are they going to come to us saying ,Well do to unforseen circumstances ,it’ll cost us monet not save us some , Sorry .?

  3. Paul says:

    Interesting question. You are right it should be looked at relative to other alternatives. Propane has already gone through the roof. Heating oil was already through the roof.


    As for the school a source that you can pipe to the school is better than one that has to be delivered in a truck. So if they were equal I would still use the gas. It is also much cleaner. I switched to gas this year and went from a 85% to a 95% furnace (was able to use a smaller one) and the vent is now a little PVC pipe. Not a big nasty sooty chimney. Not sure what to do with that old thing now?

  4. Michael Greer says:

    But we are told that America is experiencing a gas glut, that fracking and drilling are at an all-time high, that we are on the road to becoming a fuel rich nation.
    Somebody’s gonna get rich, but not us.

  5. Hugh Hill says:

    Wouldn’t it be more informative journalism if the price rise of other fuels were discussed for comparison purposes? Even the price of wood has risen, if you can even find a supplier…
    Natural gas is cleaner burning and North American sourced, making it less susceptible to disruptions that could cause catastrophic price rises for petroleum products. It seems that the price of all fuels has risen due to increased demand because of the severe weather this winter. You don’t have to be an award winning economist to predict that the ever increasing supply of natural gas will exert downward pressure on prices once weather patterns moderate.

  6. Lucy Martin says:

    Depth is good. Adding comparative info about the main energy options would have been useful. And natural gas is still an economical choice relative to alternatives.

    But many of my posts attempt too much – with more links than most readers care to explore. Sometimes the KISS principle is better.

    That also leaves lots of room for readers to bring up relevant points, as Hugh has done.

  7. Ken Hall says:

    Any chance that my favorite most soap box topic “there are far too damn many humans on spaceship Earth” could possibly have any connection to the increased price of energy? Why are there too many humans? Because the copious consumption of, primarily, hydrocarbon fuels enabled us to convert the energy released and the chemical derivatives of those hydrocarbon fuels into food and stuff allowing humans to breed as rapidly as cockroaches and devastate most other forms of fauna and turn the Earth into a gigantic sewer.

  8. Walker says:

    Paul, that’s an interesting link you provided! Notice how the retail price of heating oil is not quite 30% higher than the wholesale price, but the retail price of propane is 224% higher than the wholesale price! Price gouging, anyone?

    There’s a New York Times piece here. It’s a complicated issue, involving the use of propane in drying the U.S. corn crop as well as increasing export.

  9. knuckleheadedliberal says:

    And just to make it more complicated we should compare the available BTUs in each fuel source per unit cost.
    you can also find charts of pollutants per unit energy. I would take the dollar values on this site with a grain of salt.

  10. Kent Gregson says:

    Boycott petrochemicals any way you can. Our 60 degree glass sunroom has been driving us into the rest of the house lately during these minus degree days.

  11. If Clapton is God, Warren Haynes is Jesus says:

    If you think it’s high now, wait a few years when we begin shipping it in liquified form to areas of the world where the energy companies can charge far higher prices globally than here in North America. At that point in time, Natural Gas becomes a more global commodity and the developed and developing economies of the world will raise demand thereby causing a large price hike no matter what the winters may be like here. Basically the same situation as crude and refined oil today. What’s worse is we the present tax payers and consumers of North American “fracked” Natural gas will ultimately pay for the facilities to liquify and ship the gas overseas.

  12. mervel says:

    I think that is true, the customer base provides the revenue’s and profits for future capital expansion.

    It’s a shame that all of the good paying manufacturing and blue collar jobs and benefits flowing from the US energy boom, will never go to those who live in NYS (with of course the exception of the traders and hedge fund folks on Wall Street).

  13. Michael Greer says:

    In a few years, New York will be the largest source and supplier of domestic……drinking water. Unfortunately, there will also be a giant land rush as every newly-rich opportunist Ohio and Pennsylvania attempts to find a place away from the pollution.

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