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Why have energy prices increased?
Most homes in the markets we serve are cooled using electricity and heated using electric heat or natural gas. Regardless of the energy used, the prices of both commodities are dependent on the price of natural gas. Believe it or not, natural gas is the main fuel used to generate electricity (coal is the 2nd).
- The average price of Natural gas was $6.71 per BTU in 2022 compared to $3.90 in 2021.
- Increased global natural gas demand while having historically low inventories are inflating energy prices.
- Natural gas is susceptible to supply chain challenges just like your favorite online retailer. Lack of storage and natural gas transportation capacity add to market pressure. Geo-political issues such as the conflict in Ukraine, Euro zone policy toward Russia and Chinese energy consumption are all upsetting the previous status quo of the natural gas markets.
Volatilities in commodities markets can last some time. It will become increasingly important for customers to become more active in their own energy management.
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Reference: EIA (2022) Natural Gas. Available at: https://www.eia.gov (Accessed: 31 October 2022).