After hitting their highest levels since 2014 mere months ago, natural gas prices have tumbled in recent weeks, falling more than 10 percent on Monday alone, a development that could bring much-needed relief to many Americans who had been bracing for high home heating bills this winter.
The latest drop came after the release of updated government weather forecasts projecting a warmer-than-expected winter. Prices for natural gas traded on the futures market are now back down to levels that prevailed last summer and are down about 41 percent from their peak in October.
After taking a sharp dive during the height of pandemic lockdowns as the economy slowed, energy and other commodity prices soared this year as the economic recovery accelerated and many goods and raw materials became snarled in tangled global supply chains.
Natural gas, used to heat almost half of U.S. households, almost doubled in price earlier this fall. Prices remain higher than they were during the depths of the pandemic, at about $3.75 per thousand cubic feet on the New York Mercantile Exchange. Those prices are up about 50 percent since January, but are far lower than in late October, when they exceeded $6 per thousand cubic feet.
Natural gas prices recently took a sharper turn down as the weather in much of the country was warmer than expected. Concerns about the supply of gas, which have been a much bigger problem in Europe, have also eased in the United States.
“We’ve still got January, February, March — but it’s certainly a good sign that its coming down,” said Mark Wolfe, the executive director of the National Energy Assistance Directors’ Association, a group of state officials that provide assistance to households in need. “If it’s a warmer winter, then our estimates about consumption will be down, and if consumption is down, that’ll reduce the price of the fuel. It’s a good sign.”
Even if the winter months are not as cold as on average, other factors, including limited supply and strong demand for gas from power plants and other users, could keep heating costs high, energy experts said.
Conversely, gas prices could drop further if the Omicron variant of the coronavirus proves more dangerous than expected, slowing the economy and sapping demand for goods and services.
Good news about energy prices has been uncommon for consumers lately. The broad gauges of inflation have been running at the highest rates in decades. The vagaries of the weather, and climate change, may now cut them at least a temporary break. Several states have experienced some of their warmest December days on record. The temperature in Central Park reached 61 degrees on Monday.
According to the National Oceanic and Atmospheric Administration’s Climate Prediction Center, above-average temperatures throughout the South and most of the East could predominate for most of this winter.
Jon Gottschalck, the chief of the operational prediction branch at NOAA’s Climate Prediction Center, said those milder conditions would be the result of the recent development of atmospheric conditions known as La Niña. But he warns that all forecasts are “probabilistic,” not certainties, and that “volatile” severe cold snaps should still be expected in the months ahead.
In its short-term energy outlook released Tuesday, the U.S. Energy Information Agency noted that “the evolving effects of consumer behavior on energy demand because of the pandemic present a wide range of potential outcomes for energy consumption.”