With autumn drawing to a close, everyone is busy preparing for the cold winter months. It’s time to check the heating systems and make sure that they are primed for what’s to come. Consumers are probably looking up the natural gas and heating oil prices right now. After all, households will require a large amount of fuel for continuous heating.
Oil Vs Gas Prices:The Spike In Natural Gas Prices
To prepare for the winter season, homeowners tend to set aside funds that they will use to pay for their home heating costs. Since energy bills can vary from one season to the next, it is important to understand what is predicted.
Unfortunately for natural gas users, the markets are exhibiting a great deal of volatility. It seems that this winter will be a challenge for the whole industry. In this article, we will discuss what these predictions are based on.
Low Supply, High Demand For Natural Gas
Market anxiety is clear given the price fluctuations of natural gas futures.
The price of the commodity jumped by 20% just a week ago. It’s up by 50% year-on-year. Traders are citing a few reasons for the jitters. First, the supply levels are at a 15-year low. The industry has not been this vulnerable in a long time. Second, the demand is expected to soar. The weather forecasters are saying that this winter will be colder than usual. Consumers are likely to use up a greater amount of fuel for heating to offset the chill.
Adding to the demand is the unusually hot autumn. This September alone had 20% more days that required cooling compared to the average. It has kept air conditioners running during a period when they should be resting. This has forced power plants to use up more natural gas to meet the energy needs. Nuclear power plants have also suffered outages and shutdowns. Many of these were in the Carolinas when Hurricane Florence threatened the region. At least 17 gigawatts of energy was lost because of this safety precaution. This put pressure on traditional utility companies to step up in their absence.
US natural gas production is actually increasing at a fast pace. The problem is that demand is rising at an equally rapid rate. As a result, the supply cannot climb as high as it needs to be. This situation is unlikely to change soon. All of these factors will try to balance things out with very little room for any slack. The weather forecast was the final straw for the traders. They were expecting a warm winter based on previous models so the plunge in temperatures caught them off-guard. Trading volume shot up as investors scrambled to make purchases.
Future Prospects Of Natural Gas Prices
There are different schools of thought regarding the future of natural gas prices.
Some see the volatility as a temporary phenomenon. They think that the surge in production will eventually outpace demand, especially with new facilities opening early next year all over the US. Others say that this year’s production growth is likely to dissipate because the factors that lead to it are fading away. With the slowdown in production, the demand will become too much for the industry to handle. This could lead to a serious shortage next year that will push prices even higher.
So what does this all mean for consumers?
Well, end-users will have to buckle up for what could be a bumpy ride. They should expect their monthly bills to climb and adjust their budgets accordingly. Those in the Northeast will probably experience the worst spikes because of the weather and supply levels. Households that were planning to convert from heating oil to natural gas should probably cancel their plans as the future seems uncertain. It might have seemed like a good idea a few months ago but the situation has completely changed. For now, sticking with heating oil is the more prudent option.
If you need a reliable and quick home heating oil delivery, Townsend Energy is here to help.
Townsend Energy also offers a full line of HVAC services. If you run out of fuel, we can get your heating system up and running once again. We also offer maintenance, repairs, and installations. Our HVAC services ensure that your furnace or boiler runs efficiently and can provide the comfort that you require during the winter. Our friendly office staff is always available to answer your home heating questions.