Natural Gas Prices Dropping Daily

Natural gas prices getting cheaper by the day
By STEVE EVERLY
The Kansas City Star
Most of the talk these days is about gasoline prices, but natural gas is making news of its own: It’s getting cheaper by the day.

Natural-gas prices are down to levels not seen since 2006, and settled Wednesday at $4.97 per 1,000 cubic feet on the New York Mercantile Exchange.

Put another way, that’s more than 60 percent below where they were in July. That has wiped out predictions of a few months ago of heating bills rising 30 percent or more this winter.

The Energy Information Administration predicts that nationwide, those who use natural gas to heat their homes should pay 4 percent less than they did last winter.

How quickly any change in natural-gas prices will be passed along to consumers will depend on the gas utility. In Kansas, the cost of gas is adjusted monthly, while Missouri utilities typically change the cost twice a year, although it can be done more often if there is a sharp change in prices.

For those on level-payment plans, utilities periodically take the average of the last year’s gas bills, with some making an adjustment for estimated changes in gas prices.

The drop in wholesale prices also won’t fully show up on heating bills because gas utilities bought some of the gas they are reselling this winter when wholesale prices were higher.

Also, the amount of gas that customers use will affect what they will pay.

The decline in the price for each unit of gas nevertheless means customers dodged sharply higher heating bills, which at one time were expected to be an average $300 more this winter compared with last winter.

It provides a sharp contrast to what European consumers face this winter. Russia has stopped deliveries of natural gas to Europe, causing supply disruptions and prices to rise sharply.

If that happened to oil supplies, the U.S. would be affected as well. But natural gas is different.

The U.S. supplies 85 percent of the gas it uses and could supply more, and most of the rest comes from Canada. By contrast, the U.S. relies on imports to supply about 65 percent of the crude oil it needs.

For now, the U.S. can produce more natural gas than the country can use. The amount of gas in storage is above average, and demand is expected to decline 1 percent this year because of the economy.

Next winter could bring more good news for consumers: The Energy Information Administration doesn’t expect average natural gas prices to rise until sometime in 2010.

To reach Steve Everly, call 816-234-4455 or send e-mail to severly@kcstar.com.
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