The colder weather is coming, and that means natural gas prices are on the rise. In some parts of the country, prices have quadrupled in recent weeks as demand for natural gas spikes.
Per the Winter Fuels Outlook by the U.S. Energy Information Administration, the cost to heat a home will increase 30% compared to last year. The number of heating degree days is expected to increase 2.6 percent this winter, compared with last year’s winter.
The Industry’s Story
The oil and gas industry is quick to blame the government for these price increases. They say that increased regulations and taxes are making it more expensive to produce natural gas.
Environmental advocates, on the other hand, say that the industry is simply trying to pass along its high costs of doing business to consumers.
What’s the truth?
The Government’s Story
While it’s true that natural gas production has hit record levels, there are several factors involved in its cost. Here are just a few examples of what oil and gas companies are facing these days.
Increased demand for fracking is overloading pipelines, which means producers have to charge more for natural gas.
The industry is also facing a lot of litigation over water contamination and other environmental problems.
In addition, the industry is dealing with new regulations from the Environmental Protection Agency (EPA) that are increasing costs.
For example, the EPA has just finalized a rule that would limit methane emissions from oil and gas operations. Methane is a potent greenhouse gas, and the new rule will help to reduce its emissions by up to 45%.
Unsurprisingly, the oil and gas industry is not pleased with this regulation. It’s suing to block it, in fact. The EPA, however, says the methane rule is “a key part” of former President Obama’s Climate Action Plan.
While this new methane regulation imposes costs on the oil and gas industry, there are also opportunities for companies that support natural gas development.
In short, while the oil and gas industry does have a lot of moving parts, government regulations are only one piece of the story.
While it’s true that many different factors impact natural gas prices, including increased demand for fracking and court cases over environmental damage, there is another big factor in play here: the cost of doing business.
While industry advocates blame government regulations, the fact is that production costs are going up across the board. This includes everything from labor costs to the cost of materials.
It’s also worth noting that natural gas prices are still relatively low compared to other forms of energy. In most parts of the United States, electricity prices still cost about twice as much, on average. Oil is also more expensive than natural gas.
So, while the coldest days of winter may be yet to come, the political fight over natural gas prices has been going on for some time.