Below-zero temperatures ushered in by a parade of fierce winter storms across the U.S. are partly to blame for the highest natural gas prices in five years. That has many people counting down the days to spring. Higher temperatures in the months ahead should offer some relief from winter and costly gas bills.
Weather-related increases in demand are contributing to the short-term hike in natural gas prices and critical levels of inventory.
However, even if Mother Nature spares the Northeast and Midwest from extreme winters in the future, we still lack the pipelines in the U.S. to deliver enough natural gas to consumers—and gas-fired power plants—that need it most.
It makes surging production a moot point as long as bottlenecks prevent it from being delivered. Much of the gas is pumped more than 1,000 miles from the Gulf Coast to the Northeast.
In New England, power plants’ use of natural gas has jumped from 30% of electricity produced to 52% since 2001, with not a single new pipeline built. The region has seen electricity prices soar. Steven Gold, assistant secretary for energy for Massachusetts, said, “That’s not unusual for this time of year, but the price spikes are getting sharper and more frequent. They’ve probably grown about tenfold.”
Across the U.S., as many as 10 pipeline projects are in the works to deliver an extra 2 billion cubic feet of gas from the Marcellus Shale into the Northeast and mid-Atlantic, according to Bloomberg New Energy Finance. Half that capacity won’t be completed until late 2018.
Action needs to take place—and fast—if we are to avoid a “crisis coming down the pike.”
Further, natural gas is slowly taking the place of coal as a cleaner energy alternative. With many coal plants close to retirement in the Northeast, demand will continue to rise.
The spike in natural gas prices may not be as close to ending as many think.
These three natural gas stock companies are well-positioned to profit from the Polar Vortex and pipeline shortage: