What is the outlook for natural gas prices this winter?
With the falling natural gas prices, we now expect customers to pay only slightly more in heating costs this winter than last. Because natural gas utilities buy about 1/3 of winter’s gas supply during the spring and summer, the more recent lower prices will be blended with the higher prices paid earlier in the year. We buy natural gas in the spring and summer as a “hedge” against the volatility of market prices. Disruptions to gas supply caused by tropical storms and colder-than-normal weather are a couple reasons that natural gas prices have risen abruptly in previous years.
Natural gas customers may face significantly higher energy bills this winter especially if winter weather is colder than it was last year. In a preliminary estimate released on Sept. 7 in its “Short-Term Energy Outlook,” the U.S. Energy Information Administration (EIA) indicated that an average natural gas home-heat customer could expect to pay as much as 47 percent more for natural gas service during the winter of 2005-2006 (October 2005 through March 2006) than last winter, due in part to the impact of Hurricane Katrina on natural gas production facilities in the Gulf of Mexico. Customers in some Midwestern states (Illinois, Indiana, Michigan, Ohio and Wisconsin) could see even higher bills, EIA said. Consumers who heat with other fuels will likely pay more this winter, as well, EIA said: Northeast heating oil bills up 31 percent, propane bills up 40 percent and electric heating bills up 17 percent.
