Underlying energy market conditions may point to consumers suffering this winter and beyond

Current natural gas market conditions may indicate consumers are suffering this winter and problems persist for years to come, according to energy economists interviewed by FOX Business.

Experts said Europe’s energy crisis, caused in part by Russia’s invasion of Ukraine, will continue to hurt US consumers through the winter as global natural gas and oil supplies soured. They also noted that the green energy boost heralded by the Biden administration and many state governments will lead to further declines and more unreliable energy supplies, driving future prices higher.

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

And she continued, “At the same time, we are introducing a number of policies that discourage our companies from producing.” “Rational people would think that if there is a shortage of natural gas in Europe, the United States will do everything in its power to increase production here.”

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The power lines were photographed in Houston in 2021. (AP Photo/David J. Phillip, File/AP Newsroom)

The National Energy Aid Managers Association (NEADA) last week forecast that the average cost of home heating across all fuels, including gas, heating oil and propane, will rise 17.2% this winter compared to last year. The group further forecast that home heating costs will be 35% higher than they were two years ago.

NEADA CEO Mark Wolf said higher prices will force millions of low-income families to choose between paying for food, medicine and rent.

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As a result of significantly higher natural gas prices, electricity prices are also expected to rise compared to last year. Overall, consumers are expected to spend nearly 8% more on electricity year-on-year in 2022, according to the Energy Information Administration (EIA).

said Benjamin Zecher, economist and senior fellow at the American Enterprise Institute.

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

In the wake of the Russian invasion of Ukraine, the European Union attempted to cut itself off from imports of natural gas from Russia. Energy producers from Russia were the largest suppliers of natural gas to Europe in 2021.

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To help bridge the gap, the EU struck a deal with the Biden administration in March to send an additional 530 billion cubic feet of LNG to the EU by the end of the year. The United States exported 300 million cubic feet of natural gas in June, the latest month with EIA data, up more than 10% year-over-year.

“This is a real challenge for Europe this winter,” said Jim Hamilton, an economics professor at the University of California, San Diego who specializes in energy markets. Russia. LNG is a possibility [answer] So – you can ship that across the ocean.”

“But it’s something I think we definitely want to try to speed up here given the real potential crisis risks that Europe is facing,” Hamilton said.

European Union

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

However, increased gas exports leaving the United States to European buyers put further pressure on domestic supplies.

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

Natural gas stocks have been depleted in recent months, falling 7.4% year over year and down 11.3% compared to the 2017-2021 average, according to the Energy Information Agency.

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“You’re going to get price increases,” David Kreutzer, chief economist at the Energy Research Institute, told FOX Business. “Natural gas around the world is really tight because of the problem in Russia and the fact that Europe decided not to develop its own gas resources. So, they will look to us.”

Texas Power

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

Kreutzer and Zycher Furchtgott-Roth echoed, arguing that the United States also faces major power and grid problems in future winters due to an increased push toward green energy.

They noted that the Biden administration’s policies such as leasing restrictions from the Department of the Interior, the Securities and Exchange Commission’s climate disclosure rule proposal, and the Federal Energy Regulatory Commission’s proposal make it difficult to approve fossil fuel infrastructure projects.

“There is a massive preferential policy toward wind and solar energy which, despite the subsidies, is expensive and unreliable — so electricity prices are rising sharply in some states due to the substitution of non-conventional, non-competitive electricity in place of traditional competitive energy,” Zeicher said.

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President Biden speaks at the Scottish Climate Change Summit

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

He continued, “The political – political, regulatory, and ideological – attack on fossil fuels has had the effect, not surprisingly, of curtailing investment and, therefore, expected future production, and raising projected future prices.” “And therefore, the current prices as well.”

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He specifically pointed to California, where the state’s power grid operator recently warned of widespread blackouts due to increased demand. California and many other states have attempted in recent years to replace existing fossil-fuel power generation with renewable sources such as solar and wind power.

“The concern… is that there are places like California where they have built and relied on renewables and in Texas where, if you get a period with very cold temperatures and there isn’t a lot of wind, you are going to have blackouts or blackouts,” Kreutzer said. “It’s much worse than the price hike.”

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