Outlook for Natural Gas and Heating Fuel Prices
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Here's your money briefing for Thursday, December 9th. I'm J.R. Whalen for The Wall Street Journal. Just a few months ago, homeowners were being warned to brace for skyrocketing natural gas and heating fuel prices this winter. Fast forward to now, and those expected price jumps haven't materialized.
Hot October means windows are open and we're not turning on the furnace. So as this autumn progressed and been relatively mild, we haven't needed to burn a lot of gas.
So with the first day of winter about two weeks away, what's the outlook for consumers who are thinking about the cost of heating their homes? We'll check in with our reporter Ryan December after the break.
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Earlier this fall, the expected price of natural gas jumped, and that sent a signal to homeowners that heating their house over the winter could put a chill on their household budget. But prices have actually come down since then, and it's not even the first day of winter. So what's going on? Wall Street Journal reporter Ryan DeZember has been tracking prices in the natural gas market, and he joins us with an update. Ryan, thank you so much for being with us.
Thank you for having me.
So Ryan, you know, right around the end of the summer, we saw futures prices for natural gas and heating fuel skyrocket, and that set off alarms that winter heating bills for consumers could go through the roof. What was behind that spike in prices?
Well, you know, in the United States, we've gotten really accustomed to very low natural gas prices the last decade or so because of the shale boom.
Why were natural gas and heating fuel prices expected to spike this winter?
The gas market has been generally glutted in recent years, and that's pushed prices way down. And not only did we as consumers get used to those prices, but those prices became sort of untenable for producers. So they've had to sort of dial back production in order to get prices high enough that they can keep drilling new gas wells. So with that in the background, we had just a lot of uncooperative weather to start the year. We had a freeze in Texas that caused a spike in demand and also froze a lot of oil and gas wells to reduce production right when we needed it most. And then if you go into the spring, we had a terrible drought in the west that dried up hydropower. And that was a lot of gas emissions.
you know, needed to make up for the electricity demand. And then you get into summer and we had some of the hottest weather around the world this summer. We had the hottest June on record in North America. We had the hottest July on record in Asia. And in Europe, temperatures were so high that, you know, they were breaking records. It got almost 120 in Sicily. And what that meant was a lot of natural gas needed to power air conditioning. And that meant that the glut that had been sort of keeping prices low around the world evaporated. And that's where we got the big run up into fall. And we had predictions, which, you know, based on the available supply, that if we had a really cold winter, we would face shortages and probably price spikes.
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