Factors That Affect the Price of Natural Gas

The price of natural gas rises and falls based on many factors, including the weather, demand, amount and cost of natural gas in storage, and the extent and success of natural gas exploration and drilling.

Supply and Demand

During the1990s,natural gas customers enjoyed relatively stable prices because supplies of natural gas exceeded market demand. More recently, however, supply and demand have been tightly balanced, and any disruptions in the available supply or demand are reflected in prices.

Supply – For the past six years, market conditions have fostered an upward trend in natural gas prices. Increased demand, lower production levels and hurricane activity during this time have kept the supply and demand balance very tight.

Demand – The demand for natural gas continues to grow as more homes, schools, and businesses use gas for their energy needs. More factories and electric power generation facilities are using natural gas because it produces fewer emissions than coal or fuel oil. Increasing demand this winter will affect gas prices.

Weather

Weather plays a significant role in determining the cost of natural gas. Colder weather means an increase in the amount of natural gas used by the average household. However, it is impossible to know what this winter’s temperatures will be.

 

Understanding Your Natural Gas Bill

Your gas bill has two main parts: Supply (the cost of the gas itself) and Delivery (the cost of delivering the gas throughout the utility’s system). On average, supply costs make up about 60-75% of your bill, depending on your local utility, so any change in the cost of the gas itself can have a large impact on your overall natural gas bill.