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Energy prices for home heating fuels in the United States are soaring as the polar vortex grips the country, reviving volatility in a dormant market after years of warm winters.
Natural gas prices have risen 4% over the past week and 14% over the past month, with benchmark Henry Hub trading at $3.66 per million British thermal units as of Thursday. On Monday, the contract jumped to $4.20 per million btu.
Heating oil futures are up 5% in a week, with benchmark New York Harbor crude oil futures trading at about $2.35 a gallon as of Thursday.
Historically, the start of winter is a time of rising heating fuel prices in commodity markets. But after years of warm winter temperatures, the northern United States could be experiencing its coldest January in more than a decade, catching some traders in the market by surprise. Last year’s winter in the United States was the warmest on record, according to the National Center for Environmental Information.
“The market is pretty complacent because U.S. production is surging and inventories are above normal,” said Phil Flynn, an analyst at Price Futures Group. “But at the same time, the market may have to face winter challenges not seen for some time.”
According to the U.S. Census, approximately 47% of U.S. households heat their homes with gas and 40% use electricity. Kerosene is still used in some parts of the Northeast.
The fuel price hikes come as the eastern and central parts of the country prepare for an “Arctic pandemic,” which the National Weather Service says will likely bring “the coldest air and dangerous cold on record this season.” I’m warning you. .
The agency warned that temperatures could drop below freezing along the Gulf Coast and south of Florida, damaging citrus crops.
Flynn noted that just as mild weather could curtail wind power generation, the arctic cold blanketing Texas’ shale basins could disrupt supply, and that forecasts are accurate. It warned that if discovered, the impact on prices could be substantial. That could increase natural gas prices by “more than a dollar,” he said.
The U.S. Energy Information Administration expects household spending on winter heating to be about the same as last year, except in the Midwest. Gasoline prices are expected to rise 11% this year in the Midwest, and electricity prices are expected to rise 6%. Electricity prices are also expected to rise by 5% in the Northeast.
Prices are soaring as American households struggle to pay their utility bills.
A recent analysis of census data by Lending Tree found that more than one-third of U.S. households cut or skipped essential expenses like food and medicine in the past year to pay their utility bills. did. Nearly a quarter of households were unable to pay some or all of their bills during this period.
“We’re not just talking dollars and cents here with the potential for arbitrage. We’re talking about serious economic and human harm,” said Aku, a power analyst at PA Consulting. said Shat Kasliwal.
“We all have an obligation to take a step back and not just think about next week or next week, but think more broadly in terms of how we maintain an affordable and reliable system.”
The country’s aging power grid faces increasing security risks from extreme weather events and historic increases in demand for power from artificial intelligence and the energy transition.
Winter storms have been the cause of the biggest gas supply disruptions in recent years. The Energy Information Administration found that deadly winter storms Uri in 2021 and Elliott in 2022 reduced average monthly natural gas production by 3 to 7 billion cubic feet per day.
“For the most part, the market is pretty well prepared for this cold snap,” said Scott Shelton, energy analyst at TP ICAP. “I think it will be a little more unstable next time.”
