Cold temperatures, a shortage of storage facilities and cutbacks in natural gas drilling are all helping push the price of natural gas well above $4, according to an Ernst &Young analysis released Tuesday morning.
The increase comes after natural gas prices plunged to the lowest in more than a decade in 2012, as production outpaced domestic demand, creating a glut of natural gas.
A year ago, the futures contract for next-month delivery was $1.975. On Tuesday, the contract closed at $4.238 in New York Mercantile Exchange trading.
Consumers are beginning to absorb this excess supply, both for heat during unseasonably cold weather and through a shift toward natural gas for power generation.
Global impact: Skepticism over lower LNG prices
The price is growing as debate continues over whether the U.S. should export more natural gas and how that might affect prices for domestic consumers.
“US natural gas prices are still very low compared to global markets,” said Marcela Donadio, Americas Oil and Gas Leader for Ernst & Young’s Global Oil and Gas Center in a written statement. “The shale boom has created a new reality of abundant US natural gas. Taking full advantage of this increased supply will require access to the global market in the form of LNG exports.”
Pricey facilities: High costs slowing new liquefied natural gas plants
As needed pipeline infrastructure comes online in the next five years, there will also be opportunities to benefit from regional price differences by shipping natural gas domestically, according to Ernst & Young.
Read FuelFix coverage of the debate over exporting U.S. fuel:
- Commentary: Natural gas exports would halt US manufacturing comeback (Apr. 23)
- Natural gas industry experiencing ‘paradigm shift’ (Apr. 19)
- Energy official: LNG export decisions coming soon (Apr. 18)
- Asian nations eagerly eye cheap US natural gas (Apr. 17)
- Shell’s Odum: Optimistic on liquefied natural gas for transportation (April 16)
- Freeport LNG may get U.S. export approval in months (April 16)