Posted by Ed McFadden on Jan 09, 2017
Seasonal outlooks may offer some clues about the severity of a winter ahead, but you can’t trust these reports to always be accurate. The truth is, no one knows for sure whether an upcoming winter will be mild or frigid.
Uncertainty makes it especially difficult to predict your winter energy costs. Many business owners remember the polar vortex of 2014. If you weren’t prepared with a natural gas plan that mitigated sky-high costs, the cold weather also hit your energy budget hard.
Fortunately, you can educate yourself on how to avoid repeating the same mistakes. In part one of this three-part blog series, learn more about why natural gas rates are so high in the winter.
What Causes Natural Gas Rates To Rise During Winter?
In the past, the fuel of choice for large electric generators was coal. However, in recent years, because of environmental concerns and competitive natural gas prices, the fuel of choice is now natural gas.
The Marcellus Shale has an abundant supply of natural gas – a century’s worth, in fact. Spanning across Pennsylvania, West Virginia, southeast Ohio and upstate New York, the shale is the largest natural gas resource in the United States.
Extracting natural gas from the earth has become less expensive. Efficient extraction along with natural gas abundance in the United States contributes to drastically lower natural gas prices.
A strong economy and periods of economic growth have also generated an increase in natural gas demand. Today, more industrial and commercial businesses are using natural gas not only to heat facilities, but also to generate electricity and fuel operations.
Unfortunately, natural gas pipeline infrastructure has not yet caught up with increased demand. During mild spring, summer and autumn months, the infrastructure supports normal levels of demand. But cold winter weather, in addition to prolonged hot summers, creates much higher levels of demand.
According to the U.S. Energy Information Administration, U.S. natural gas consumption is expected to increase from 70.94 billion cubic feet per day in July 2016 to 101.48 billion cubic feet per day in January 2017.
Natural gas pipelines already run close to full capacity during a normal winter. Frigid temperatures put extra pressure on the pipelines, thus prices rise to meet this peak demand to manage capacity-constrained market areas.
Protect Your Business From High Natural Gas Rates
While high natural gas rates have the potential to drain your budget, developing a strategic energy plan enables you to combat costs. Not only should your natural gas provider help you take advantage of statewide energy programs, but it should also offer a natural gas plan tailored to your business’s needs.
In the next installment of this blog series, you’ll discover the benefits of fixed, variable, and block and index pricing. You’ll also learn how to choose the best energy plan for your business’s size and budget vulnerabilities.
Download this free whitepaper to learn more about protecting your budget from high natural gas rates this winter.