With the hotter months coming, prices for natural gas in America are projected to climb at least 25% more than the current rates.
As the US moves into a hot and dry summer, gas prices are expected to increase even more. Tuesday’s market price hike was 4% higher due in part to intense heat across Southern states as well shortages occurring in many areas. Experts and analysts say that apart from the heat, the shortages were triggered by the ongoing war between Ukraine and Russia.
As evidence suggests, Matt Palmer, a Senior Director at S&P Global Community, said that there’s no doubt that gas prices in the US will go up.
“You’re seeing exports running full out on LNG; power burn from the power sector… layer in the heat we’re seeing and the expectation that the southern tier of the continent in May and June will see well above normal temperatures. That’s a recipe for higher prices.”
The National Weather Service reported that some states of the US are expected to get warmer in the summer. The states include Oklahoma, Louisiana, and Texas.
The spike in gas prices is complemented by the shortage of supplies in the US. The conditions have far-reaching implications for businesses and consumers who depend on transporting goods, services or other jobs that need the product to function.
When faced with these challenges, several want to turn to coal as an alternative. However, coal is way more costly. That is why Palmer said that the chances of hikes in gas prices in the US market are “getting stronger by the day.”
The United States does not entirely depend on the imports of gas. However, supply went down during the pandemic, and prices rose during the pandemic. In recent months, companies are starting to slowly recover from curbing the shortage.
In February, the average production of the industry is at 115.2 billion cubic feet per day, a big difference from the usual rate. Experts say that the drastic changes in climate contributed to the problems in supply management – cold winter days immediately followed by a heatwave. The drop in production rate pushed suppliers to use the reserves they had for the next winter.
Bespoke Weather said that there would be an increase in demands in the next 15 days.
TortoiseEcofin Senior Portfolio Manager, Rob Thummel, said that he expected May to be a “calm time for energy markets” like any other year. “I guess it’s an early dose of summer. If we continue to see hot weather, that is likely to have the same effect as extremely cold weather. It’s going to have an impact,” Thummel noted.
The supply is expected to be curbed due to recent companies resuming their operations.