If you’ve been shopping for low rates from natural gas companies in Georgia this fall, you’ve probably noticed a drastic rise in natural gas prices with companies across the board. This week, we wanted to share a little about why prices have risen and how Gas South—and other natural gas companies—set rates.
It starts with the NYMEX
Like other natural gas companies, Gas South doesn’t produce natural gas. We purchase it to sell to homes and businesses after a price has been set by the New York Mercantile Exchange (NYMEX), the world's largest exchange for energy products. At the NYMEX, traders meet and set prices based on several different factors.
Why is the NYMEX high right now?
Supply and demand is a huge consideration when it comes to setting the price of natural gas, and it’s at the heart of why prices have risen this year—higher than they’ve been since a spike in 2008.
More than a decade ago, gas and oil companies began using more efficient methods to extract natural gas from beneath the earth. And that helped create a nice reserve to put into storage. Demand had also been relatively low during this period. So, needs were met, and prices stayed low.
Hurricane Ida put a crimp in that when it blew through in August, leaving a wake of destruction that, among other things, shut down natural gas production in the Gulf of Mexico by 94%. Despite the setback, there was still a nice reserve prior to this summer, but record temperatures helped siphon much of that off.
Natural gas is the largest source of electricity production in the U.S.—power plants make about 40% of their electricity from it. And when the heat wave hit, electricity use skyrocketed as people ran their air conditioning units into overtime. The capacity of interstate pipelines was unable to handle the volume of gas needed to meet demand, thus constraining pipeline flow (unusual for the summer season), which often pushes prices up.
In short, supply wasn’t meeting the demand. And that boosted the price of natural gas set by the NYMEX, causing home and business owners throughout the U.S. to pay more for their gas.
How can you cut your natural gas costs?
The price of natural gas fluctuates, despite being relatively stable from 2008 until now. It’s impossible to say for certain where rates will be in the future. But there are ways to protect your pocketbook.
Apart from the various methods to make your home more energy efficient, selecting the right natural gas plan can have a huge impact on your bottom line, regardless of how high rates currently are.
A fixed rate plan, for example, will let you lock in your rate for the term of your agreement. Or for complete peace of mind against rising natural gas prices, choose our OnePrice Plan™. Sign up and pay one, flat monthly payment (plus tax), regardless of usage or where the NYMEX prices are.