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Natural gas accounts for 42% of electricity generation. It’s feedstock for fertilizers. It’s widely used for heating. And 19% was exported in 2024.
By Wolf Richter for WOLF STREET.
The notoriously volatile price of US natural gas futures has been zigzagging higher since mid-2024 and overnight spiked to over $4.80 per million Btu, and currently trades at $4.52 per million Btu, up by 140% from a year ago.
Nearly 43% of electricity in the US was generated by natural-gas-fired power plants in 2024. Natural gas is widely used for heating by residential, commercial, and industrial customers. Fertilizer makers use natural gas as feedstock. Natural gas is used as fuel for city buses, drayage trucks, garbage trucks, etc. And the US has been investing in a massive export boom of natural gas, with exporters taking up 19% of US production last year. 
For the past 20 years, it has been drill-baby-drill, and US natural gas production has more than doubled, turning the US into the largest natural gas producer in the world. Overproduction has caused the price of natural gas to collapse repeatedly.
Over the past three decades, natural gas prices spiked to $10 per million Btu and higher, including to over $15 in 2005. Natural gas prices can go wild. And in 1997, natural gas had already been at $4.50.
Power generators, utilities, and fertilizer makers purchase much of their projected needs with long-term contracts, so price changes in the futures market leave their near-term costs largely unaffected. But they might raise their prices anyway, and many have already done so, blaming the higher costs. Regulated utilities will do what regulators let them do.
The CPI for natural gas piped to the homes across the US has risen by 6.4% since August (through January, February CPI will be released on Wednesday) and is up 4.9% year-over-year.
Electricity prices have risen because regulators allow utilities to hike their prices. In California, for example, PG&E’s electricity prices have spiked with multiple price hikes and fee changes, as it passes on the costs of the settlements related to wildfire destruction, the costs of their wildfire mitigation efforts, other costs, and whatever, while its net income surged to $2.5 billion in 2024.
National storage levels are running near the bottom of the five-year range for this time of the year, at 1.76 trillion cubic feet, down from 2.34 trillion cubic feet a year ago, when they were forming the new top of the five-year range.
Forecasts for milder weather indicate that there will be less heating-related demand.
But export demand, both via LNG to the rest of the world and via pipeline to Mexico, is a booming business and rose to 7.7 trillion cubic feet in 2024, using about 19% of US production in 2024.
In January, Trump had lifted the freeze on LNG export permit applications for new LNG export terminal. Biden had paused approvals of permits for new export terminals in order to curtail future growth in demand from LNG exporters that could drive up wholesale prices of natural gas in the US.
In February, the Trump administration granted an LNG export license to the Commonwealth LNG project in Louisiana. And in March it approved an LNG export extension for the Golden Pass LNG terminal in Texas. And LNG exports will ramp up further and create more demand for of US natural gas.
It has become a huge business. And this demand from exporters comes on top of the growth in demand from power generators scrambling to provide electricity to new data centers (for AI and the cloud), which are enormous power hogs, and which are spouting like mushrooms.
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The post Price of Natural Gas Futures Up 140% Year-over-Year: One More Reason for Inflation to Not Back off Easily appeared first on Energy News Beat.
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