Will natural gas prices ignite a recession?
It is a bit more difficult to follow natural gas prices than it is gasoline prices. Instead of having visible signs posted at well travelled street corners, natural gas prices are only visible on market exchanges that most people rarely visit. Instead of knowing in advance how much they are spending like they are when they are motorists, consumers that heat their homes using natural gas often find out how much they owe after they have already made all of their purchasing decisions – like where to set the thermostat.
As of this morning, Bloomberg is reporting that the NYMEX exchange price for natural gas at Henry Hub was $14.15 (USD) per million BTUs. In contrast, the average price last year was about $8.50 and it was about $2.00 in 1997.
American households that heat with natural gas will spend an average of $306, or 41 percent, more for fuel this winter than last year, according to the U.S. Energy Information Administration. “Should colder weather prevail, expenditures could be significantly higher,” the agency’s November report predicted.
Your expenditures could also be higher if you live in a larger than average house, have children that forget to close the door behind themselves, or if you also use gas for cooking and clothes dryers.
When you are cursing the gas company, don’t forget to include those far sighted people that spent the 1990s and early years of the new millenium building natural gas fired electrical power plants.
In sympathy, oil prices are once again pressing the $60.00 per barrel mark. The relationship is pretty simple; oil can replace natural gas in some power plants, so if gas prices get too high, electric power companies switch to oil. The increased demand puts pressure on that fuel as well.
