Gasoline prices reached their peak at over $5 per gallon last June before declining to the current $3.70, but the worst may be yet to come for winter heating costs. Driven by skyrocketing natural gas prices, residential heating bills in the cold months ahead will likely exceed even last winter’s unusually high levels. Biden administration climate polices targeting domestic natural gas are a major contributor to this.
High natural gas prices will have a significant impact on the majority of homes this winter. According to the U.S. Energy Information Administration (EIA), nearly half of American households are heated with natural gas. Another 41 percent heat with electricity for which natural gas is the single largest source of generation. Most of the rest rely on either heating oil or propane, both of which are also high and likely to remain so this winter.
Current natural gas prices are at or near 14-year highs—the entire time span of the shale era—and are more than twice last year’s lows. Futures for winter delivery suggest little if any relief, as do the below-average volumes in storage heading into the heating season. Perhaps the only consolation is that the natural gas price increases in the U.S. are considerably smaller than those seen in Europe and Asia.
At the residential level, natural gas prices are 33 percent higher this August than last, and electricity 15.8 percent, according to the Bureau of Labor Statistics. Thus, energy bills are already high and rising even before the first frost.
Unless we get an unusually mild winter across most of the U.S., this is shaping up to be a very costly heating season and quite possibly a record-setting one.
Prior to the start of the 2021-2022 heating season, EIA projected cost increases over the prior winter of $173 to $746 for households using natural gas, and $76 to $1,268 for those using electricity. Those numbers proved to be underestimates, as an unusually cold January across much of the country increased the amount of energy needed to get homeowners through the winter. The winter of 2022-2023 will not only lock in last year’s increases but quite likely add to them.
While much of the attention surrounding high natural gas prices has focused on the war in Ukraine and decline in natural gas supplies from Russia, that explains only part of the story. The Biden administration has cracked down on domestic fossil fuels, including natural gas. This includes a sharp curtailment of natural gas leasing on federal lands, bureaucratic opposition to new natural gas pipelines, and pressure on banks not to lend for fossil fuel projects. As a result, America is not taking full advantage of its natural gas resources, which makes prices here considerably more vulnerable to exogenous events like the invasion of Ukraine.
Absent a change in the administration’s anti-natural gas policy, the trend of costlier winter heating seasons may continue, not just this year but in future ones as well.