The coronavirus pandemic has greatly impacted our society in a variety of ways. It slowed our economy, greatly taxed our health system. And it has also heavily affected our multiple sources of energy in varying ways. One such source of energy that fluctuated as a result of the pandemic, as well as other factors, is natural gas. While natural gas has been quite low this year. It is expected to be on the rise for 2021.
There are a few different factors that contributed to the lower costs of gas through this year. Firstly, we had a warmer winter, which means that tanks did not need to be filled as often since people were not cranking up their heat. There was also the price war between Russia and Saudia Arabia, where Saudi Arabia was flooding the market with cheaper oil. And finally, the Coronavirus pandemic had greatly contributed to a much smaller demand in the market.
Natural gas is measured in MMBTU units, which equates to one million British Thermal Units, or BTU for short. Basically, BTU is the measurement for the amount of energy contained in various types of fuel. A single BTU is equal to 1055 joules.
The US EIA Forecast
Natural gas pricing has already gone up significantly in the past couple of months. The average Henry Hub gas spot price in September was $1.92/MMBtu and this has already increased to $2.39/MMBtu in October. According to the Short Term Energy Outlook from the U.S. Energy Information Administration, “EIA expects Henry Hub spot prices to rise to a monthly average of $3.42/MMBtu in January 2021 because of rising domestic demand for natural gas for space heating, rising U.S. LNG exports, and reduced production. EIA expects that monthly average spot prices will remain higher than $3.00/MMBtu throughout 2021. Averaging $3.14/MMBtu for the year, up from a forecast average of $2.14/MMBtu in 2020.”
Essentially, the situation that has led us to this increase is multifold. The factors above contributed to the lower use of natural gas. Furthermore, the EIA forecasts less natural gas production this winter. In other words, demand will be increasing and the production will not keep up with the draw, which will lead to increasing prices for natural gas. And because of these price increases, the EIA expects a reduced demand for natural gas in the electric power sector.
It is important to consider that this natural gas news is made up of forecasts and predictions. Various changes can cause fluctuations in predictions. It is observable this year, as previous predictions were altered due to the pandemic. As well as other factors. As we get closer and into the new year, these predictions may fluctuate, but as it stands, it appears to be a heavily rising trend.
How We Can Help With All of Your Energy Needs
Whether you are looking to negotiate a better price with your next gas or electrical contract, we are here to help. We have over 15 years of experience in the industry. As a full-service energy consulting firm, we handle everything from energy efficiency analysis and retail energy brokering to tax exemptions and tax refunds. Our headquarters is based in Dallas, Texas, but we also serve New Hampshire, New Jersey, New York, Illinois, Ohio, Maryland, Massachusetts, and Pennsylvania. Whatever your energy needs may be, give us a call and let us help.