Rising natural gas prices may pose opportunity for industry
The recovering economy is driving up natural gas prices, which could boost energy companies’ bottom lines but hit consumers in the wallet.
Wholesale prices have more than doubled from earlier this year. Natural gas was nearly $6 per million British thermal units Thursday, up from $2.66 in April.
In Europe and Asia, the prices have soared to more than $20 million per BTU. Analysts chalk up the surges to a number of factors: pent-up demand from earlier in the coronavirus pandemic; a move away from coal to natural gas; and slumping supplies because of less drilling.
In the United States, a net exporter of natural gas, the prices could spur more drilling. Colorado, the country’s No. 6 oil producer and No. 7 natural gas producer, could see a rebound in production.
On the flip side, households and businesses could see a jump in heating and electric bills. Xcel Energy-Colorado, the state’s largest electric utility, is seeking regulators’ approval for a rate increase, citing high prices and low supplies.
“I do not think we’ve seen the highest prices yet,” said Chase Walker, the Denver-based vice president of business development for Embark Consulting. “I do think we’ll see that hit our bottom line for sure, as individuals, as cities, states and governments.”
As the weather is cooling down and winter nears, natural gas supplies are lower than normal. Dean Foreman, chief economist for the American Petroleum Institute, said the pace of additions to underground storage areas is 10% to 15% below the five-year average.
“It’s unprecedented to be in this territory right now at a time where if we have a cold winter, we have concerns and, I think, a lot of explaining to do to consumers about why we don’t have more supply when we have ample resources here at home,” Foreman said.
A big part of the explanation has to do with the sudden, drastic drop in demand for oil at the start of the pandemic that continued as transportation and businesses slowed or shut down around the globe. Big supplies of oil and not enough buyers sent oil prices below zero in April 2020...
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