As we kick off winter 2021-2022, you’re probably anticipating a jump in your heating bill due to dropping temperatures. According to the National Oceanic and Atmospheric Administration (NOAA), it’s actually slated to be a warmer winter than usual, with above-average temperatures predicted across most of the U.S. due to LA Niña climate conditions – but you should still be prepared for higher than normal heating and electricity bills due to the rising cost of natural gas – and other fossil fuels – across the world. In this article, we’ll explain why natural gas prices are increasing, where the increases are most dramatic, and how you can protect yourself from the volatility of fossil fuel energy sources (spoiler alert: going solar will help!).
Key takeaways
- Natural gas prices are anticipated to be higher this winter compared to last winter – the Midwest will be hit the hardest in the US
- On average, EIA predicts natural gas heating bills to increase by 30 percent, and other fossil fuel heating sources like propane and oil will increase even more
- Electricity bills will also increase for many Americans, with Eversource customers in eastern Massachusetts expecting a 25% uptick in bills
- The best way to protect yourself is to electrify your home: with solar, storage, and air source heat pumps, you can significantly reduce your reliance on volatile fossil fuel prices
- Visit the EnergySage Marketplace to compare custom quotes for solar or solar-plus-storage systems
What’s in this article?
- What factors impact the cost of natural gas?
- Why are natural gas prices increasing now?
- How will your heating bill be impacted?
- How will your electricity bill be impacted?
- Which states consume the most natural gas?
- Where will natural gas prices increase the most?
- How can you protect yourself from rising natural gas prices?
What factors impact the cost of natural gas?
First off, it’s important to note that we’re not economic experts, but understanding what influences the cost of natural gas really boils down to one simple concept: supply and demand. When supply exceeds demand, natural gas prices will drop, but when demand approaches or exceeds supply, you can expect prices to increase. According to the U.S. Energy Information Administration (EIA), the supply of natural gas depends largely on factors including how much natural gas is being produced, how much natural gas is currently in storage, and how much natural gas is being imported and exported from the U.S.
On the demand side, variations in winter and summer weather – such as extreme cold or heat – will impact how many people need natural gas. Economic growth also leads to higher demand as the commercial and industrial sectors consume more natural gas to produce greater quantities of goods and services. Finally, the cost and availability of other fuel sources will impact the demand for natural gas: if oil prices skyrocket, more people may switch to natural gas, thereby increasing demand.
Why are natural gas prices increasing now?
Remember last winter when we had a streak of really cold days – including the Texas Freeze – and this past summer when we saw heat wave after heat wave? Even though this winter is anticipated to be warmer than usual, we’re still paying for these past weather events due to spot prices. Spot prices of natural gas reflect the current price it’s being bought and sold at on the market – but the price that’s actually passed onto us as consumers is the retail rate. Generally, retail rates only change a few times a year depending on where you live. So, when these extreme weather events occurred in the last 12 months, the price you were paying for natural gas was already set and didn’t account for the dramatic increases in spot prices. Now, to recoup the increased costs that utilities paid to procure natural gas, they’re raising retail rates throughout the year.
Another large factor at play right now is economic growth: more and more businesses are growing and consumers are returning to more normal behavior after the shutdowns that occurred at the start of the pandemic. Higher demand for goods and services means greater production, which requires more natural gas. However, the production of natural gas has remained fairly constant, so as demand for gas approaches ever closer to the supply, we’re seeing prices increase.
Are other countries being impacted by rising natural gas prices?
Yes – in fact, the U.S. is being impacted to a much lesser extent than many other countries. The U.S. is the world’s largest producer of natural gas, so because we produce the natural gas we consume (instead of relying on other countries for imports), we’re better protected from price spikes. In particular, countries in Europe are experiencing surging natural gas prices: Europe depends on Russia for imports of natural gas, making them much more vulnerable to shortages. Because Russia currently has limited supply and Europe’s inventory levels are depleted, Europe is now experiencing record-breaking gas prices.
How will your heating bill be impacted?
In 2019, approximately 48 percent of U.S. households depended on natural gas as their primary heating source, according to the U.S. Census Bureau. So, if you’re one of these households, you can expect to see heftier natural gas bills this winter (if you haven’t already). According to the EIA, households relying on natural gas can expect to pay about 30 percent more on average this winter in comparison to last winter – or about $172 more in gas bills cumulatively between October 2021 and March 2022. However, where you’re located will also impact how much you’re paying, with the Midwest seeing the most dramatic price increases.
Are the costs of other heating sources also rising?
Your heating bill will likely increase no matter what fuel source you consume. According to EIA, if you rely on either propane or oil as your primary heating source, your heating bill will increase even more than if you use natural gas, with heating bills for those fuels increasing at 54 percent and 43 percent, respectively. Your bill will also increase if you rely on electricity for heating (because electricity in the US is still predominantly generated by fossil fuels), but to a much lesser extent, at only 6 percent. If the winter turns out to be colder than expected, these numbers could rise even further, but if it ends up being warmer and you need less heat, you might not see as dramatic of increases.
How will your electricity bill be impacted?
Many electricity bills will also increase this winter as a result of rising natural gas prices – natural gas power plants are currently the largest source of electricity production in the U.S., generating about 40 percent of our country’s needs. It’s used to power steam turbines and gas turbines, which in turn generate the electricity we use in our homes. However, depending on the electricity mix where you live, how much electricity you consume, and if you generate and consume renewable energy (like solar!) at your home, you may be better protected from increasing electricity bills.
Which states consume the most natural gas?
Some states consume more natural gas than others – though this isn’t necessarily an indication of how much the price will increase in the state. Many states that consume more natural gas also produce more natural gas, meaning their distribution costs are lower and, thus, the retail rates consumers in that state pay are also lower. For example, Texas consumes the most natural gas of any state, but also produces the most of the fuel. On the other hand, Hawaii consumes the least natural gas but doesn’t produce any. California has the most residential consumers of natural gas (due to its large population) but has a lower total consumption than Texas. Explore the table below to learn how much natural gas your state consumes and produces, as well as the total number of residential natural gas consumers.
2020 natural gas consumption and production by state
| State | Total consumption (million cubic feet) | Total dry production (million cubic feet) | Total number of residential consumers |
|---|---|---|---|
| Texas | 4,630,179 | 7,992,572 | 4,889,732 |
| California | 2,074,302 | 162,741 | 11,186,350 |
| Louisiana | 1,824,625 | 3,180,709 | 901,709 |
| Pennsylvania | 1,714,410 | 7,050,433 | 2,845,197 |
| Florida | 1,578,415 | 481 | 814,864 |
| New York | 1,262,445 | 9,692 | 4,547,497 |
| Ohio | 1,156,719 | 2,329,543 | 3,409,315 |
| Illinois | 1,090,592 | 1,815 | 3,958,170 |
| Michigan | 928,905 | 64,143 | 3,353,954 |
| Indiana | 827,866 | 4,197 | 1,796,202 |
| Oklahoma | 814,200 | 2,528,417 | 961,516 |
| Georgia | 759,276 | 0 | 1,865,564 |
| Virginia | 708,123 | 102,793 | 1,267,211 |
| Alabama | 691,983 | 114,233 | 777,368 |
| New Jersey | 656,268 | 0 | 2,871,126 |
| Mississippi | 587,569 | 28,130 | 463,705 |
| North Carolina | 543,385 | 0 | 1,331,848 |
| Wisconsin | 541,802 | 0 | 1,811,337 |
| Colorado | 523,221 | 1,808,676 | 1,840,038 |
| Arizona | 500,328 | 66 | 1,306,008 |
| Minnesota | 464,850 | 0 | 1,582,365 |
| Iowa | 404,250 | 0 | 944,885 |
| Tennessee | 390,701 | 2,763 | 1,194,358 |
| Massachusetts | 388,032 | 0 | 1,865,886 |
| Alaska | 380,435 | 317,573 | 136,814 |
| South Carolina | 335,075 | 0 | 734,890 |
| Kentucky | 331,942 | 66,080 | 784,180 |
| Washington | 328,688 | 0 | 1,232,852 |
| Arkansas | 328,050 | 480,772 | 564,639 |
| Missouri | 300,524 | 1 | 1,437,585 |
| Nevada | 298,828 | 12 | 906,016 |
| Kansas | 294,016 | 149,308 | 880,942 |
| New Mexico | 288,487 | 1,758,145 | 605,734 |
| Connecticut | 287,722 | 0 | 576,971 |
| Maryland | 284,490 | 10 | 1,185,385 |
| Oregon | 267,388 | 320 | 776,811 |
| Utah | 255,347 | 233,239 | 1,002,463 |
| West Virginia | 243,769 | 2,378,035 | 336,322 |
| Nebraska | 183,875 | 351 | 542,706 |
| Wyoming | 157,468 | 1,250,036 | 169,238 |
| North Dakota | 146,781 | 718,015 | 149,828 |
| Idaho | 126,737 | 107 | 428,374 |
| Rhode Island | 95,904 | 0 | 247,399 |
| Delaware | 89,028 | 0 | 185,217 |
| South Dakota | 86,117 | 407 | 197,769 |
| Montana | 82,590 | 36,881 | 284,373 |
| New Hampshire | 51,966 | 0 | 112,022 |
| Maine | 45,780 | 0 | 37,653 |
| District of Columbia | 27,090 | 0 | 155,294 |
| Vermont | 13,056 | 0 | 47,739 |
| Hawaii | 2,413 | 0 | 28,991 |
Source: U.S. Energy Information Administration, Natural Gas Consumption by End Use, Natural Gas Gross Withdrawals and Production, Number of Natural Gas Consumers
Where are natural gas prices anticipated to rise the most?
While New England has the highest natural gas prices overall, the largest price increase between 2020 and 2021 will occur in the East North Central region of the U.S., according to the EIA. In 2022, the EIA predicts natural gas prices to continue rising everywhere except New England, where prices are expected to drop by $0.39/thousand cubic. In 2022, the largest price increase is expected to occur in the East South Central region of the U.S. Overall, the EIA predicts that between last winter and this winter, the Midwest – which incorporates the East North Central states but not the East South Central states – will experience the largest increase in retail natural gas prices at about 45 percent.
Past, present, and future retail natural gas prices by region (in dollars per thousand cubic feet)
| Region | 2018 | 2019 | 2020 | 2021 | 2022 | 2021 to 2022 change |
|---|---|---|---|---|---|---|
| New England | 15.02 | 14.72 | 14.73 | 15.76 | 15.37 | -0.39 |
| Middle Atlantic | 11.28 | 11.64 | 11.76 | 12.36 | 12.86 | 0.5 |
| East North Central | 8.4 | 8.39 | 8.38 | 10.39 | 11.3 | 0.91 |
| West North Central | 9.3 | 8.75 | 8.69 | 10.03 | 11.31 | 1.28 |
| South Atlantic | 12.76 | 13.52 | 13.88 | 15.13 | 15.38 | 0.25 |
| East South Central | 10.97 | 11.06 | 11.13 | 12.03 | 14.47 | 2.44 |
| West South Central | 11 | 10.46 | 11.32 | 12.65 | 13.15 | 0.5 |
| Mountain | 8.79 | 8.25 | 8.4 | 9.71 | 10.45 | 0.74 |
| Pacific | 11.87 | 12.23 | 13.38 | 14.84 | 15.37 | 0.53 |
| U.S. Average | 10.46 | 10.46 | 10.76 | 12.36 | 12.93 | 0.57 |
Source: U.S. Energy Information Administration, Short-Term Energy Outlook Data Browser
Case study: Massachusetts
To better understand how these rising natural gas prices could impact you, let’s take a look at an example in Massachusetts. I live in eastern Massachusetts and recently received an email from my utility company, Eversource. Eversource is a regulated energy distribution company: New England’s largest utility with over 1 million electricity customers and 500,000 natural gas customers in Massachusetts alone.
Eversource changes the retail cost of electricity twice a year: on January 1 and on July 1. Their email to me stated that on January 1, 2022, electricity prices will increase: assuming I consume 500 kilowatt-hours (kWh) of electricity in a month, Eversource anticipates that my bill will increase about $30, or 25 percent, between December 2021 and January 2022. However, the impact of this change in rates will vary depending on how much energy I use, the rate I’m on, and the weather conditions in my area. This rate hike will be in effect until June 30, 2022.
On November 1, 2021, Eversource also increased their natural gas prices for Massachusetts residents by between 12 and 21 percent, depending on your service territory.
How can you protect your home from rising natural gas prices?
Nobody wants to pay more for the energy you need to power your home – but the good news is that there are steps you can take to protect yourself in the future! In addition to improving your home’s energy efficiency, you can also electrify your home, which makes you much less vulnerable to volatile fossil fuel prices. Here are the steps to get started electrifying your home.
1. Install air source heat pumps
Most heating technologies, such as a natural gas furnace, modify the temperature of your home by generating hot air, which is then circulated throughout your home. However, air source heat pumps work differently: instead of generating heat, they simply transfer heat from one place to another (with a heat exchanger leveraging the difference between the temperature inside and outside your house), making them extremely efficient. Importantly, air source heat pumps run on electricity, meaning that as long as your electricity comes from a renewable source like solar panels, you can substantially reduce – or even eliminate – your heating bill.
Learn more about air source heat pumps.
1. Install a solar system
Next, to power your heat pumps, you’ll want to install solar panels: unlike natural gas, which is a finite fossil fuel, solar is a renewable energy, meaning the supply is endless – so you don’t need to worry about supply and demand. By installing solar, you can significantly lower your electricity bill, protecting you from the inflation and market volatility associated with fossil fuels. In fact, over 20 years, the average home can expect to save between $10,000 and $30,000 on electricity costs if they go solar.
3. Install energy storage
Even with solar, you’ll still need to use electricity from the grid when the sun isn’t shining – and the grid is still dominated by fossil fuels with only about 20 percent of the nation’s electricity coming from renewables at the moment. However, with energy storage (AKA solar batteries), you can store the excess energy generated by your solar panels for use when the sun is down, allowing you to substantially reduce your reliance on the grid and fossil fuels like natural gas.
Learn more about energy storage.
How can policies protect Americans from energy volatility?
Supporting policies that expand renewable energy in the U.S. is another great step you can take to help protect yourself from volatile fossil fuels in the future. Because the wind and sun are unlimited ‘fuel’ sources, the price of energy generated by them is not subject to supply and demand in the same way as fossil fuels. Thus, while the price tags associated with some legislation may come with sticker shock (like the Build Back Better Act), ultimately making the grid cleaner and electrifying as much as possible – including transportation – will translate to lower energy costs for you and your neighbors. Just look at the rising gas prices right now: if you drive an electric vehicle and power it with solar energy, you’re protected from the volatility that comes with driving a gas-powered vehicle. Check out this article to compare the cost of charging a Tesla with filling up your car with gas.
Start electrifying your home today through EnergySage
If you’re looking to protect yourself from rising natural gas prices by installing a solar or solar-plus-storage, the best place to do so is EnergySage. When you sign up for free on the EnergySage Marketplace, you’ll receive up to seven custom quotes from installers in your area. By comparing these quotes, you can find a system that meets your needs at the right price.
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