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Economy

Global Natural Gas Prices Are Soaring

SCOTT SIMON, HOST:

Autumn is here. There's a nip in the air. BJ Leiderman writes our theme music. And soon, you might turn on your heater for the first time this year, but fuel prices are already rising. NPR's Camila Domonoske joins us now. Camila, thanks so much for being with us.

CAMILA DOMONOSKE, BYLINE: Thanks for having me.

SIMON: Why are gas prices in the news now?

DOMONOSKE: Well, prices normally go up in the winter, but, of course, it's not winter yet. It's just September, right? And prices in the U.S. have already gone up two or three times higher than where they were last year. This is actually a global issue. Stacey Morris, who's with the index provider Alerian, she says prices are much worse in Europe and Asia.

STACEY MORRIS: They're, you know, five times as high as what we see in the U.S. So if people think prices are bad here, they're really bad over there.

DOMONOSKE: And so this is raising concerns. Basically, if this is what prices are like in September, what's going to happen when it actually gets cold?

SIMON: Well, yeah, should we brace for higher heating bills?

DOMONOSKE: Yeah. About half of the U.S. uses natural gas for heating, and this will push bills up. I'll note that consumers are a little insulated from the price swings, so your bills won't triple just because gas prices triple, but you will feel it. But beyond heating bills, we use natural gas for a lot of things. Heavy industry uses it, and crucially, we use it to make electricity. So high natural gas prices can affect you even if you don't have a gas line to your house. And, of course, there are already some concerns about inflation, right? So if you're worried about prices, the big question is actually how cold is it going to get this winter? The colder it is, the more demand there is for natural gas and the higher prices could go.

SIMON: Now, once again, is this just us or are people overseas going to be affected?

DOMONOSKE: Yeah, especially in Europe, a cold winter could be a real crisis, much worse than we're looking at here. A lot of European governments are already starting to talk about sending aid packages to individual households to help them cover their sky-high winter bills. And there are worries that if demand for heating gets high enough, that there will then be shortages of natural gas at power plants where it makes electricity. And this could leave parts of Europe struggling to even keep the lights on this winter. And right now, natural gas markets around the world are connected. The U.S. actually turns some natural gas - liquefies it and sends it to other countries. So markets overseas do have an impact on what happens here in the U.S.

SIMON: Camila, why are prices so high right now?

DOMONOSKE: Yeah. Well, for one thing, there's just not much natural gas being produced. Jen Snyder is with the energy data company Enverus, and she says to understand why, it helps to go back to last year, when oil and gas got incredibly cheap.

JEN SNYDER: Prices were so low that these companies literally had no prospects for drilling any of their acreage to earn any reasonable returns.

DOMONOSKE: So they didn't. But now demand is rising worldwide for a lot of reasons. It's not just cold winters that boost demand for natural gas. Hot summers do it, too, because air conditioners use electricity. And as coal plants get retired because they cause so much pollution and contribute so much to climate change, when they get shut down, you need more electricity from elsewhere. That boosts demand for natural gas. A lot of factors, but you add them all up, suddenly, the world wants more natural gas, and it's just not there.

SIMON: What would you suggest we watch for in the months ahead?

DOMONOSKE: Well, there are a few things. One, do producers boost their output because prices got higher? Are governments going to boost home heating assistance programs, take other sorts of measures? But really, for the bottom line, it comes back to the weather. How cold is it going to get - that's going to determine how high prices go.

SIMON: NPR's Camila Domonoske, thanks so much for being with us.

DOMONOSKE: Thanks for having me. Transcript provided by NPR, Copyright NPR.

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