Underlying energy market conditions could signal pain for consumers this winter and beyond

current Natural gas market situation According to energy economists interviewed by Fox Business, this winter could signal pain for consumers and continuing issues for years to come.

Experts said the energy crisis in Europe, partly Russia’s invasion of Ukraine, will continue to hurt consumers in the US during the winter as global natural gas and oil supplies remain strained. He also noted that green energy initiatives initiated by the Biden administration and several state governments would further deplete and lead to more unreliable energy supplies, leading to future price increases.

Diana Furchtgot-Roth, director of the Heritage Foundation’s Center for Energy, Climate and Environment, told Fox Business in an interview, “The biggest problem is that shortages in Europe are driving up prices, and prices are set globally. ” “Since natural gas prices are higher globally, we’re exporting more, and that’s driving up prices here.”

“At the same time, we are putting forward a number of policies that discourage our companies from producing,” she continued. “Reasonable people might think that if there was a natural gas shortage in Europe, the United States would have done as much as it could to increase production here.”

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Power lines are pictured in Houston in 2021. (AP Photo/David J. Phillips, FILE/AP Newsroom)

The National Energy Assistance Directors Association (NEADA) estimated last week that the average cost of home heating across all fuels, including gas, heating oil and propane, would rise 17.2% this winter compared to last year. The group further estimated household heating costs to be up by 35% compared to two years earlier.

NEADA executive director Mark Wolfe said the high prices will force millions of low-income families to choose between paying for food, medicine and rent.

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Electricity prices are also expected to rise compared to last year, driven by higher natural gas prices. Overall, consumers are projected to spend about 8% more for electricity year-over-year in 2022, according to the Energy Information Administration (EIA).

“Prices are going to be higher, especially for natural gas, because of how the weather is this winter due to increased demand for liquefied natural gas from Europe and Asia,” said Benjamin Zyker, an economist and senior fellow. Enterprise Institute.

An aerial image of suburban homes in California. (iStock)

Following Russia’s invasion of Ukraine, the European Union (EU) has attempted to distance itself from importing natural gas from Russia. Russia’s energy producers were by far the largest natural gas supplier to Europe in 2021.

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To help fill the gap, the EU made a deal with the Biden administration In March to send an additional 530 billion cubic feet of liquefied natural gas (LNG) to the EU by the end of the year. The US exported 300 million cubic feet of natural gas in June, the latest month with EIA data showing up more than 10% year-on-year.

“It’s a real challenge for Europe this winter,” said Jim Hamilton, an economics professor at the University of California at San Diego who specializes in energy markets. Russia. Liquefied natural gas is a potential [answer] For that – you can send him across the ocean.”

“But it is something that I think we definitely want to try to accelerate here, given the potential real crisis risk that Europe is facing,” Hamilton said.

The European Union

European Commission President Ursula von der Leyen and European Commissioner for the European Green Deal Frans Timmermanns address a media conference in Brussels on July 20, 2022. (AP Photo/Virginia Mayo/AP Newsroom)

However, increased gas exports leaving the US for European buyers has put Increased pressure on domestic supply,

Natural gas traded at $7.71 per million British thermal units (mmBtu) on Tuesday, while futures for January 2023 touched $8.04 per mmBtu, according to market data. By comparison, the average price of natural gas between 2010 and 2021 was $3.26 per mmBtu, Federal Reserve data showed.

According to the EIA, natural gas inventories have declined 7.4% year-on-year in recent months and 11.3% relative to the 2017-2021 average.

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“You’ll get a price increase,” David Kreutzer, senior economist at the Institute for Energy Research, told Fox Business. “Natural gas is really tight around the world because of the problem in Russia and the fact that Europe has decided not to develop its own gas resources. So, they are watching us.”

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A power plant is shown in Texas on June 15, 2021. (Brandon Bell / Getty Images / Getty Images)

Both Kreutzer and Zeicher echoed Furchtgot-Roth, arguing that the increase also causes the US to face significant power grid and energy issues in future winters. push towards green energy,

He noted Biden administration policies such as an Interior Department leasing ban, a Securities and Exchange Commission climate disclosure rule proposal, and a Federal Energy Regulatory Commission proposal that made it harder to approve fossil fuel infrastructure projects.

“This is largely a policy bias toward wind and solar energy, which, despite subsidies, are largely expensive, unreliable – hence, the replacement of unconventional, uncompetitive electricity with more conventional competitive power has led to the lack of electricity in some states. Prices are rising rapidly,” Zeicher said.

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President Biden speaks at climate change summit in Scotland

President Biden speaks during the COP26 climate summit on November 2, 2021 in Glasgow, Scotland. (AP Photo/Evan Vucci, Pool, File/AP Newsroom)

“Political attacks – political, regulatory, ideological – on fossil fuels have, not surprisingly, had the effect of reducing investment and, therefore, expected future output and expected future prices to rise,” he continued. kept. “And, therefore, the current prices as well.”

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He pointed specifically to California, where the state’s energy grid operator recently warned of a massive blackout Due to increasing demand. California and several other states have attempted to replace existing fossil fuel electricity generation capacity with renewable energy such as solar and wind in recent years.

“Worry… are there places like California where they’ve built renewable energy and their reliance on them and in Texas where, if you get a period with really cold temperatures and not a lot of wind, you get There’s going to be a brownout or a blackout, which is worse than a price hike,” Kratzer said.

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