Nat gas price at unseen level since 2008 New YorkCNN Business —
US natural gas prices have skyrocketed to levels unseen since 2008, a spike that threatens to offset the benefits of falling prices at the gas pump.
Natural gas futures surged 7% on Tuesday to close at $9.33 per million British thermal unit (BTU), the highest closing price since August 1, 2008.
Although natural gas futures cooled off a touch on Wednesday, they remain up about 70% just since the end of June. And natural gas is up a staggering 525% since closing at $1.48 in June 2020 when Covid-19 had shut much of the US economy down.
The summer spike is being driven in part by high demand as scorching temperatures through much of the country force Americans to crank up the air conditioning. That in turn has chipped away at relatively low inventory levels.
“We’ve had this perma-heat wave cooking the United States,” said Robert Yawger, vice president of energy futures at Mizuho Securities.
As temperatures drop this fall and winter, the natural gas spike signals sticker shock for families. Not only is natural gas a leading fuel source for the electric grid, it’s the most popular way to heat homes in America.
“Depending on the weather, it could be a challenging winter,” said Rob Thummel, senior portfolio manager at Tortoise Capital Advisors. “But not as challenging as in Europe. They are at risk of running out of natural gas. We aren’t.”
Europe’s natural gas crisis is being driven by its reliance on energy from Russia, which has slashed natural gas flows to Europe in response to Western sanctions.
The European Union has been forced to lay plans to ration natural gas, a drastic step that will hurt families and businesses. Natural gas prices have skyrocketed so high in Europe that it threatens to send the continent’s economy into recession.
For context, Europe’s natural gas prices are trading at levels equivalent to about $70 per million BTUs, according to Andy Lipow, president of Lipow Oil Associates. That is roughly seven times higher than prices in the United States.
But that is little consolation to Americans grappling with high prices at the grocery store, clothing stores and at restaurants.
Even as natural gas prices surge, oil prices have tumbled, helping to drive gasoline prices sharply lower. The national average for regular gasoline has dropped 64 days in a row, according to AAA.