Natural gas, the nation’s most prevalent heating fuel, is getting cheaper just as winter is arriving because supplies are plentiful and temperatures have been mild.
The price of natural gas has dropped 30 percent in a month, to $3.14 per 1,000 cubic feet on Tuesday from $4.50 in late November. That’s a steep drop even for a fuel notorious for volatile price swings.
The lower prices are expected to linger and could reduce electricity prices and heating bills in the coming months. Natural gas is used by half of the nation’s households for heating and to generate 26 percent of the nation’s electricity.
Kansas City area consumers who pay a cost-of-gas charge that changes monthly should see a decline. But the effect of the lower wholesale price is muted because area gas utilities have already bought some of their supply for this winter.
Propane consumers also have good news this winter. They were slammed with higher prices last winter because of supply shortages, but average residential propane prices are now at $2.38 a gallon, down 33 cents from a year ago. Propane stockpiles are at 78 million barrels, up 28 million barrels from a year ago.
Natural gas often rises as winter weather approaches, and a frigid November sent the price higher. But December warmed up, and temperatures for the rest of the winter are expected to be close to normal.
Bob Brackett, an analyst at Bernstein Research, wrote in a recent note to investors that he expects natural gas to average “in the low 3s” into the spring, and a warm winter could push the price below $3.
Last year at this time natural gas was near $4.50, and it reached as high as $6.15 in February after unusually cold weather gripped the eastern half of the country and stuck around for weeks. Prices in some locations averaged double or triple that amount as pipelines struggled to carry all the gas that was needed.
Because of the way natural gas and electric utilities are regulated, customers probably won’t see the recent drop reflected in their bills right away. Many will instead see higher prices as a result of last year’s price spike.
But the lower market prices could at least slow the rise in retail prices and perhaps reverse it if the low prices last.
Conditions look good for low prices throughout the spring, but they could reverse later next year, analysts say.
One-fifth of the nation’s natural gas production is from gas found when drilling for oil, “associated gas.” A drop in the price of oil is forcing drillers to cut back, and that may slow the growth in production of associated gas.
The Star’s Steve Everly contributed to this report.