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If air conditioning your home seemed expensive this summer, get ready, because turning up the heat can cost even more this winter.
Rising utility bills are due to soaring prices for natural gas, which generates about 40% of electricity in the United States.
The US Energy Information Administration expects this surge to last through the winter, as Russia’s invasion of Ukraine has reduced overall supply while global consumption remains high.
Here’s what’s behind the price spike and how it could affect you.
Russia is militarizing its natural gas supplies
There is a lot less natural gas in the world these days because of Russia.
For years, Russia has supplied Europe with cheap natural gas to power its factories and heat its homes. But after the West imposed sanctions for the war in Ukraine, Russia cut supplies, weaponizing its natural gas.
While global supply has fallen, demand has remained high.
In the United States, half of homes use natural gas for heating or cooling.
Given the heat this summer in parts of the United States, many have had their air conditioners working overtime.
U.S. natural gas inventories have also fallen this year, pushing prices up about 300% from just a few years ago.
What will this mean for prices in the United States?
Prices should continue to rise.
Even though the country’s liquid natural gas stocks are low, that hasn’t stopped the United States from exporting large quantities to Europe to help fill the void left by Russia.
US natural gas producers are encouraged to export since they should benefit from the surge in world prices.
“If the price they can get in Europe is much higher than the price they can sell their natural gas to the United States, then some of that gas is going to be exported to Europe, and that’s going to raise the price of things. in the United States,” says Ellen Wald, oil and gas expert at the Atlantic Council.
“Not at the levels we see in Europe, but we could continue to see higher energy costs in the United States because of this,” she adds.
There is also a geopolitical argument for stepping up supply to Europe. The European Union is a huge trading partner, and major economic disruptions could affect the United States.
How much will electricity bills increase?
Bills could go up significantly, especially in a state like Texas, which is the largest consumer of natural gas, followed by California.
The National Energy Assistance Directors Association (NEADA) estimates the average family could pay over $1,200 to heat their home this winter. That’s $175 more than last winter, which is remarkable considering nearly 40% of families are already feeling strapped for cash, according to a new NPR/PBS NewsTime/Marist survey.
According to NEADA, the 40% of American households that use natural gas could see their winter heating costs increase by a third, which could keep inflation high.
But it also largely depends on the winter weather. The United States could be spared a massive spike if the winter is mild.
Kirill Kudryavtsev/AFP via Getty Images
How long could this last?
It all depends on whether Russia will reopen its gas taps for Europe before winter. Kremlin spokesman Dmitry Peskov said this month that Russia would only resume gas flows if the West lifts sanctions.
The other important factor is how quickly Europe can find alternative sources of natural gas.
Currently, Europe gets most of its gas through pipelines, but it is rushing to set up additional infrastructure to receive liquefied natural gas, which can be transported by sea from countries like Qatar.
It will take time, but in the long run it would free Europe from dependence on Russia for a key product.
“Europe will be in a better position because it will have completely got rid of its dependence on Russian gas,” said Agathe Demarais, director of global forecasts at the Economist Intelligence Unit. “After a few years, Russia will no longer be able to militarize gas supplies.”
Until then, as the United States continues to export its supplies to Europe and demand remains high, this price spike could last for some time.
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