If you’ve been shopping for low rates from natural gas companies in Georgia recently, you’ve probably noticed that the price of natural gas has remained high 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 are huge considerations when it comes to setting the price of natural gas, and it’s at the heart of why natural gas prices increased in the last few years—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, 2021, 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 that summer, but record temperatures helped siphon much of that off as the demand for electricity went up.
In years past, coal was the chief source of fuel used to produce electricity in the U.S. But in recent years, natural gas has taken its place—about 40% of our nation’s electricity is made by burning natural gas. When a heat wave hit in the summer of 2021, 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. And that lack of supply 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.
Stretching into 2022 and early 2023, electricity producers have continued to rely on natural gas as their chief source of fuel used to continue meeting U.S. needs for electricity. And the high demand for natural gas is not just in the U.S., as Europe and parts of Asia have also increasingly moved away from coal in favor of natural gas to create energy.
This worldwide demand was strained even further when Russia invaded Ukraine in the earlier part of 2022, souring export relations between Europe and Russia, the world’s largest producer and exporter of natural gas. To help offset the demand in Europe created by these geopolitical disagreements, U.S. producers in 2022 exported record volumes of liquified natural gas (LNG). About 75% of the LNG produced was shipped overseas in 2022—compared to 34% the year before—according to the U.S. Energy Information Administration. The situation remains the same as of early 2023.
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.
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.
After you've chosen the right plan for you, you can further reduce your monthly cost by making your home more energy efficient.