The U.S. Energy Information Administration (EIA) warned that consumers will pay more for natural gas this winter.
The data for other winter fuels will increase this winter as well:
NOAA’s winter weather forecast predicts a winter colder than 2021 “and the average winter for the previous 10 winters.”
In our latest Winter Fuels Outlook, we forecast that U.S. households that primarily use natural gas for space heating will spend an average of $931 on heating this winter (October–March), which is 28% (or $206) more than last year.Natural gas is the primary heating fuel for 47% of U.S. homes, according to the U.S. Census Bureau’s 2021 American Community Survey. The retail price of natural gas and the amount of natural gas consumed determine how much households spend on winter natural gas bills.
EIA predicts retail natural gas prices will rise 22% to $15.95 per thousand cubic feet (Mcf).
The Midwest will likely have the most significant price increase to $13.80/Mcf. That’s 27% more than what those people paid last winter.
On top of that, New England risks blackouts due to a shortage of natural gas supplies. EIA mentions the lack of natural gas inventories, which affects its predictions.
The working natural gas inventories are “6% below the previous five-year average”:
Working natural gas inventories in our forecast reach almost 3.5 trillion cubic feet (Tcf) by the end of October, which would be 6% below the previous five-year average. U.S. natural gas storage injections usually take place from April through October, although injections often occur in early November, depending on temperatures and market conditions. Storage withdrawals typically occur from November through March. U.S. natural gas inventories began this injection season at the lowest level in three years because of high heating demand in January and record LNG [liquified natural gas] exports. The above-average withdrawals last winter, combined with more-than-average consumption this summer, contribute to our forecast for below-average storage inventories heading into the winter heating season.Although both spot and retail natural gas prices are higher in our forecast than last winter, under the baseline temperature case for this winter, we forecast draws in natural gas inventories will be less than the five-year average because we expect that increased demand this winter will be more than offset by growth in natural gas production. We expect U.S. dry natural gas production will be 2.8 Bcf/d (3%) higher than last winter. Our forecast for combined growth in consumption and exports this winter is 3.0 Bcf/d (3%). By the end of March 2023, we expect natural gas inventories to be 1.5 Tcf, which would be 7% less than the previous five-year (2018–2022) average.As inventories narrow the deficit to the five-year average, we expect it will put downward pressure on natural gas prices later in the winter. In our forecast, monthly average Henry Hub spot prices peak near $7.70/MMBtu in January, before falling to around $6.50/MMBtu by March.
New England is especially at risk because the area “relies on natural-gas imports to bridge winter supply gaps.” It is “now competing with European countries” because Russia halted most of the natural gas to the continent. Yikes:
The region’s power-grid operator, ISO New England Inc., has warned that an extremely cold winter could strain the reliability of the grid and potentially result in the need for rolling blackouts to keep electricity supply and demand in balance. The warning comes as executives and analysts predict power producers could have to pay as much as several times more than last year for gas deliveries if severe weather creates urgent need for spot-market purchases.“The most challenging aspect of this winter is what’s happening around the world and the extreme volatility in the markets,” said Vamsi Chadalavada, the grid operator’s chief operating officer. “If you are in the commercial sector, at what point do you buy fuel?”Power producers in New England are limited in their ability to store fuel on site and face challenges in contracting for gas supplies, as most pipeline capacity is reserved by gas utilities serving homes and businesses. Most generators tend to procure only a portion of imports with fixed-price agreements and instead rely on the spot market, where gas prices have been volatile, to fill shortfalls.
John Pettigrew, the head of the National Grid in the United Kingdom, warned the British they face blackouts “in the late afternoon to early evening.” The blackouts would affect households, businesses, and hospitals.
The natural gas forecast is bleak across the mainland:
Analysts put the gas shortfall at almost 15% of average European demand in winter, meaning the continent has to cut consumption to get through the peak demand heating season.”The situation will remain very fragile,” Cuneyt Kazokoglu, director of energy economics at FGE, said.”Household gas consumption in Germany jumped at the end of September to the highest level since March because of a cold spell, and demand was about 14% above the 2018-2022 four-year average. This is posing a threat,” he added.
If New England has a mild or moderate winter, the grid could make it through the season with few problems.
But NOAA predicts a cold winter. Hold onto your hats, New Englanders!
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