Cold Weather Drives Natural Gas Prices Up – Commodities Update

Mar 10, 2014 | by Franck Cushner, CFP®

As frigid temperatures descended across the northeast, southeast, and Midwest, demand for heat increased dramatically. The single most utilized commodity to heat homes and businesses throughout the country is natural gas. So as the demand for heating escalated, so did the demand for natural gas. The U.S. Department of Energy closely monitors and tracks the cost of natural gas, especially during times of increased demand. The price of natural gas, as measured by BTUs (British Thermal Unit), has doubled in the past year, from $3.26/BTU to a five-year high at over $6.55/BTU.

 

Optimistically, the recent increase in demand spurned by cold weather has been quenched with primarily a domestic supply of natural gas. Over five years ago the U.S. was still reliant on natural gas imports to satisfy its demand, and now that demand is almost entirely being met by domestic production alone.

 

Dramatic short-term increases in demand are known as spikes, which translate into price spikes should supply remain unchanged. Prices tend to return to their normal levels once the weather improves or additional supply is brought to market.

 

As additional domestic supply is brought on, new uses of natural gas are identified nationwide. Natural gas has even made its way to professional football fields, where heated tubes beneath the field keep the ground from freezing in the winter and allows grass to grow evenly throughout the year. 

Sources:  U.S. Department of Energy

 

 

 

 

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