Lock in natural gas price for 2021-2022?
Lock in natural gas price for 2021-2022?
I live in Northern New England and for the first time, live in a house with natural gas heating. I saw some headlines recently about natural gas prices surging heading into winter (https://www.cnn.com/2021/09/28/business ... index.html) and expected to be volatile.
This news arrived a couple of weeks after receiving a letter from my natural gas utility about locking in natural gas supply charge for $0.9256 per therm. I have until October 22nd to do that lock in.
I have no idea if this is a reasonable price to lock in at or not, since all of my previous winter heat experience has been with heating oil. Any advise?
This news arrived a couple of weeks after receiving a letter from my natural gas utility about locking in natural gas supply charge for $0.9256 per therm. I have until October 22nd to do that lock in.
I have no idea if this is a reasonable price to lock in at or not, since all of my previous winter heat experience has been with heating oil. Any advise?
Re: Lock in natural gas price for 2021-2022?
Ouch. Yucky time of year to lock. We locked in during feb-mar-apr for two years at 1/3 that price. We can choose who we lock with for our natural gas suppliers. Not sure if you have the option for that.
However, if you’ve never had a chance before maybe do it for a short term lock. Feels like the concerns are very legit. As farmers if we hadn’t already looked in our fertilizer pricing for this fall, which is connected to natural gas, we would no longer be allowed to lock anything. Friends are being turned away. Next year will be very interesting in agriculture.
However, if you’ve never had a chance before maybe do it for a short term lock. Feels like the concerns are very legit. As farmers if we hadn’t already looked in our fertilizer pricing for this fall, which is connected to natural gas, we would no longer be allowed to lock anything. Friends are being turned away. Next year will be very interesting in agriculture.
Re: Lock in natural gas price for 2021-2022?
Unfortunately we didn't get any info about locking in the price during Feb-Apr since we moved into our new house after that. This rate lock would last from (I presume) October 22nd to April 30th.FarmWife wrote: ↑Sat Oct 09, 2021 7:41 pm Ouch. Yucky time of year to lock. We locked in during feb-mar-apr for two years at 1/3 that price. We can choose who we lock with for our natural gas suppliers. Not sure if you have the option for that.
However, if you’ve never had a chance before maybe do it for a short term lock. Feels like the concerns are very legit. As farmers if we hadn’t already looked in our fertilizer pricing for this fall, which is connected to natural gas, we would no longer be allowed to lock anything. Friends are being turned away. Next year will be very interesting in agriculture.
Given our situation of little historical info (most of our neighbors are also brand new) and the price uncertainty, I'm leaning towards the rate lock option. One interesting note is our bill does have a very basic historical graph showing roughly how many therms were used while our house was getting constructed, presumably when the house was less efficient since it wasn't fully sealed in until January. I whipped up a quick spreadsheet to estimate our bill depending on per therm and have a rough idea of what a worst case month might look like and we can afford it.
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Re: Lock in natural gas price for 2021-2022?
My last bill has $0.45 per therm for gas. A year ago it was $0.20 so my bill is already showing a 100% increase for natural gas. If you look at natural gas history graph, it looks like every Nov. is the peak and then declines from there. I'll stay on a variable rate with my utility co.
Re: Lock in natural gas price for 2021-2022?
How much of your actual bill is that variable cost of gas, half?
Re: Lock in natural gas price for 2021-2022?
I don't think now is the right time to lock. Concerns about supply and inflation appear to be already baked into your quote.
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Wow that's more than 3X the lock $ from just 4 months ago. Don't do it.
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Re: Lock in natural gas price for 2021-2022?
British perspective.
I wish I had locked. Gas itself is about half my bill, rest are fixed charges.
EdIT you appear to have quite a high price for locking in, given US wholesale gas prices.
Unless a further 50% rise in prices say, would be a great financial hardship it's probably worth taking the risk and seeing what the cost of hedging is in the spring or summer, say.
I wish I had locked. Gas itself is about half my bill, rest are fixed charges.
EdIT you appear to have quite a high price for locking in, given US wholesale gas prices.
Unless a further 50% rise in prices say, would be a great financial hardship it's probably worth taking the risk and seeing what the cost of hedging is in the spring or summer, say.
Last edited by Valuethinker on Sun Oct 10, 2021 9:48 am, edited 2 times in total.
Re: Lock in natural gas price for 2021-2022?
I am fortunately locked in at $0.396/CCF (CCF = 1.037 therms) from June 2019 thru May 2022 through our township aggregation program. This was a little above the going rate for 2019 and 2020 but Duke Energy’s current rate is $0.713 so I am glad to be locked for the coming winter. The Duke rate at the beginning of the year was $0.33, so it has gone up quite a bit. It feels like you would be locking at a high price but it could go even higher, impossible to say for sure.
Last edited by Kenkat on Sun Oct 10, 2021 9:12 am, edited 1 time in total.
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Re: Lock in natural gas price for 2021-2022?
You will have seen my post. It may well be US gas costs come down from here as there are specific European and Chinese factors at play in those markets.crg11 wrote: ↑Sat Oct 09, 2021 7:33 pm I live in Northern New England and for the first time, live in a house with natural gas heating. I saw some headlines recently about natural gas prices surging heading into winter (https://www.cnn.com/2021/09/28/business ... index.html) and expected to be volatile.
This news arrived a couple of weeks after receiving a letter from my natural gas utility about locking in natural gas supply charge for $0.9256 per therm. I have until October 22nd to do that lock in.
I have no idea if this is a reasonable price to lock in at or not, since all of my previous winter heat experience has been with heating oil. Any advise?
Re: Lock in natural gas price for 2021-2022?
I miss having gas. We moved across town to a street that doesn't have a gas main. If you think those prices are bad you should see what propane and heating oil go for!
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Re: Lock in natural gas price for 2021-2022?
A well insulated house would work on a heat pump (air to water or air to air). W some form of backup (electric bar or propane typically).
Is that a viable alternative?
Re: Lock in natural gas price for 2021-2022?
Cali here -- my last gas bill had a cost change mid-month to $1.64 / therm, up from $1.45.
Re: Lock in natural gas price for 2021-2022?
Alright, thanks all for the feedback. Good to know this lock in price seems high. After further reflection, I'm going to roll the dice and see what this winter brings.
Re: Lock in natural gas price for 2021-2022?
Interesting, I have never even been offered an opportunity to lock in natural gas rates. I was always under the impression the rates are regulated by the State. I would assume that the utility is locking in prices in bulk and there is no big advantage to doing so as an individual consumer. Is this specific to Northern New England?
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Re: Lock in natural gas price for 2021-2022?
Depends how your state's regulation & Public Utilities Commission work.Beachey wrote: ↑Sun Oct 10, 2021 9:47 am Interesting, I have never even been offered an opportunity to lock in natural gas rates. I was always under the impression the rates are regulated by the State. I would assume that the utility is locking in prices in bulk and there is no big advantage to doing so as an individual consumer. Is this specific to Northern New England?
Texas is completely deregulated, for example. Some people had several thousand per cent increase in electricity bills during February's power crisis.
Not exactly sure how gas regulation works but something similar I believe.
The political system can't control the wholesale gas price. Thus even in a fully regulated market there has to be a degree of bill indexation.
Re: Lock in natural gas price for 2021-2022?
Im actually getting quotes to have one zone of air conditioning (first floor) replaced with a Mitsubishi heat pump. We get rebates and 0% financing from utility.Valuethinker wrote: ↑Sun Oct 10, 2021 8:40 amA well insulated house would work on a heat pump (air to water or air to air). W some form of backup (electric bar or propane typically).
Is that a viable alternative?
It will offset some, but not all of the propane heat cost. Primary heat is hot water baseboard (common in northeast US) and they need high water temps that don’t work well with air to water heat pumps unfortunately.
Edit: I see that propane prices are going up this winter too. Need to get moving on the heat pump deal.
Re: Lock in natural gas price for 2021-2022?
What is your variable price?
Where I live the big problem with not locking is that the variable price is almost twice as high as the price you can lock at. This is not just year, the variable price has always been much higher.
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Re: Lock in natural gas price for 2021-2022?
I think you need to set up an account with your natural gas provider and look at your old bills - on line. How much have you been paying for a therm? how has it fluctuated? how many therms per month have you been using? These are rhetorical questions to help you gather info. what you really need is an estimate for how many therms you will use over the winter to heat your home.This news arrived a couple of weeks after receiving a letter from my natural gas utility about locking in natural gas supply charge for $0.9256 per therm. I have until October 22nd to do that lock in.
I think you need to do some investigation -- look at your natural gas providers website (now that you have an account). Look for a way to estimate or maybe even see the gas usage for your house BEFORE you owned it... OR look to see if your natural gas provider provides info on the gas usage by "house type" or area. (ie how much your neighbors in houses like yours use per year or season).
You can then estimate how many therms YOU might use this winter. You can then calculate some guestimates of how much you might pay over this winter at different price points. Don't forget your gas bill is made up of delivery charges, taxes, fees, and possibly other charges. So the "total bill" isn't a good representation of how much you are paying for natural gas. Odds are once you have a year or two of living in your house - you will have a good estimate of how many therms per year you use.
I think you should also go have a look at your furnace (or boiler if you have steam heat) - does it have an energy star label on it - read it if it does - it will give you clues as to how much natural gas your house will use. If you furnace hasn't been cleaned in a few years - get that done. Hopefully you've been changing the filter every few months if you have a gas furnace (and have been using the AC over the summer). If you haven't - nows the time to add that "maintenance" to your list of things you do every month (or so).
If your furnace/boiler ancient (more than 20 years old)? If it is expect to use more energy than the average for your area.
Right now the cost per therm of gas on my most recent bill was .53. Locally the cost of a therm of gas fluctuates during the year - just like my gas usage. Therms have been in the .30 to .80 range for pretty much ALL of the 25 years years I've lived in my house. the cost of natural gas fluctuates from season to season. The exception were 3 years during the natural gas shortage (over a decade ago) when the cost of a therm went up to $1.60 - during the coldest month of the year in my area - pretty much 3 years in a row. My yearly gas expense went from $1200 a year to about $1500 to $1600 a year for those years.
I'm not bothering to lock in any price for natural gas. I can handle an increase in the cost of natural gas should it happen for 3 or 4 months. I use a self imposed "budget plan" (because my natural gas provider has a stupid useless budget plan). I typically make the same payment each month except in November when I add $100 or so dollars so I have credit to continue making the "fixed amount" I typically make the other 11 months of the year. I'm contemplating having an additional $200 available to cover my gas bills if the prices jump dramatically. I currently have a good amount in my "bank" (i think it's called a credit on my bill) and I'm thinking I will be fine going into the winter - I should be able to cover any increases without panic or "not having enough" to cover all my bills.
America is the biggest producer of Natural Gas and to the best of my knowledge we aren't going to have a shortage (but I expect prices to go up some) - Europe on the other hand - is having trouble with the delivery piece of their energy puzzle - I expect they will have much higher costs of natural gas than we will.
One other bit of info - it's really hard to cut back dramatically on how many therms you use - especially in the winter by lowering your thermastat temperature -- especially if you already manage the temp in your house. If you never give the temperature a thought - then you might see some savings without lost of comfort by starting to manage the temperature.
A properly working water heater and a properly working drying (especially newer ones - like less than 20 years old) don't use a lot of natural gas.
A properly working newer furnace - especially a middle of the road to high efficiency furnace don't use a lot of natural gas.
A properly working OLDER furnace will be way more efficient than an older furnace that is not in the best condition.
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Re: Lock in natural gas price for 2021-2022?
Pennsylvania has utility choice for both gas and electric.Beachey wrote: ↑Sun Oct 10, 2021 9:47 am Interesting, I have never even been offered an opportunity to lock in natural gas rates. I was always under the impression the rates are regulated by the State. I would assume that the utility is locking in prices in bulk and there is no big advantage to doing so as an individual consumer. Is this specific to Northern New England?
Re: Lock in natural gas price for 2021-2022?
Valuethinker wrote: ↑Sun Oct 10, 2021 8:33 am Unless a further 50% rise in prices say, would be a great financial hardship it's probably worth taking the risk and seeing what the cost of hedging is in the spring or summer, say.
According to EIA data, home heating oil is selling for $3.08 per gallon in New England, or $2.22 per therm.
Even if there is a 50% increase in the OP's natural gas rates, and even after adding in delivery costs, it will still cost less than home heating oil.
Re: Lock in natural gas price for 2021-2022?
+1. We also have energy choice in Ohio. DW & I have been choosing energy suppliers for many years. Actually the utility companies encourage their customers to do so. They ALWAYS make their money thru fixed & transportation charges.slickracer wrote: ↑Sun Oct 10, 2021 12:49 pmPennsylvania has utility choice for both gas and electric.Beachey wrote: ↑Sun Oct 10, 2021 9:47 am Interesting, I have never even been offered an opportunity to lock in natural gas rates. I was always under the impression the rates are regulated by the State. I would assume that the utility is locking in prices in bulk and there is no big advantage to doing so as an individual consumer. Is this specific to Northern New England?
Re: Lock in natural gas price for 2021-2022?
Yep, that was my point.talzara wrote: ↑Sun Oct 10, 2021 1:56 pmValuethinker wrote: ↑Sun Oct 10, 2021 8:33 am Unless a further 50% rise in prices say, would be a great financial hardship it's probably worth taking the risk and seeing what the cost of hedging is in the spring or summer, say.According to EIA data, home heating oil is selling for $3.08 per gallon in New England, or $2.22 per therm.
Even if there is a 50% increase in the OP's natural gas rates, and even after adding in delivery costs, it will still cost less than home heating oil.
In Mass, heating oil is averaging $3.08 (vs $2.08 last year) and propane is averagin $3.60 (vs. $2.90 last year)....
I am on propane (house prior owners converted for some reason) , which at $3.60/gallon is like buying oil for $5.50/gal or natural gas for $4.14/therm
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Re: Lock in natural gas price for 2021-2022?
I think your are confusing posters here.talzara wrote: ↑Sun Oct 10, 2021 1:56 pmValuethinker wrote: ↑Sun Oct 10, 2021 8:33 am Unless a further 50% rise in prices say, would be a great financial hardship it's probably worth taking the risk and seeing what the cost of hedging is in the spring or summer, say.According to EIA data, home heating oil is selling for $3.08 per gallon in New England, or $2.22 per therm.
Even if there is a 50% increase in the OP's natural gas rates, and even after adding in delivery costs, it will still cost less than home heating oil.
My comment was directed at the OP, not jharkin. jharkin has no choice as to fuel source, barring installation of a Heat Pump.
OP is wondering whether to hedge gas price. It seems that is very expensive right now. So I suggested that unless a sharp uplift in prices would pose a real budgetary problem, that it might be best to wait until next year before hedging (I do believe people should "lock in" their gas price at least a year out, if they can).
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Re: Lock in natural gas price for 2021-2022?
Currently c 4x. It all depends on how much gas Gazprom is willing/ able to ship into the European market. Opinions differ whether the current squeeze is physical constraints OR Gazprom playing politics [OT comment removed by admin LadyGeek].LittleMaggieMae wrote: ↑Sun Oct 10, 2021 10:59 am
America is the biggest producer of Natural Gas and to the best of my knowledge we aren't going to have a shortage (but I expect prices to go up some) - Europe on the other hand - is having trouble with the delivery piece of their energy puzzle - I expect they will have much higher costs of natural gas than we will.
LNG is being sucked into Europe (the US now does export some gas via LNG). Or it was, but then the JKM price (ie the Asian LNG price) went to $25/ mmbtu -- an all time high*. Vs say $5.60/ mmbtu onshore in USA. What you will now see is demand destruction - energy intensive users shutting down.
US NG production is all about fracking. And fracking for oil more than for gas. As long as it is economic to do the former, there will be a plentiful supply of the latter, it seems.
You can look up your AFUE (?correct acronym) efficient on the EIA website I believe, by model number.One other bit of info - it's really hard to cut back dramatically on how many therms you use - especially in the winter by lowering your thermastat temperature -- especially if you already manage the temp in your house. If you never give the temperature a thought - then you might see some savings without lost of comfort by starting to manage the temperature.
A properly working water heater and a properly working drying (especially newer ones - like less than 20 years old) don't use a lot of natural gas.
A properly working newer furnace - especially a middle of the road to high efficiency furnace don't use a lot of natural gas.
A properly working OLDER furnace will be way more efficient than an older furnace that is not in the best condition.
Whilst it's true that it's better to have a furnace with over 90% efficiency (vs 60-80% depending on age of furnace) I don't agree with this.A properly working newer furnace - especially a middle of the road to high efficiency furnace don't use a lot of natural gas.
If the weather is cold, even a high efficiency furnace will use a lot of gas. Ask anyone in Texas re last February. Or those who experienced repeated visitations by the Polar Vortex in the last few years over Midwest and Northeast.
Besides having efficient, properly cleaned and maintained furnace and HW heater, what the homeowner can do is get an Energy Audit - these are often subsidized by the local state or public utility corporation. Additional insulation in the roof space and some forms of leak proofing are often quite cheap to do and have significant gains. Paybacks of less than 10 years, and less than 5 years in some cases. By contrast, new windows don't usually justify themselves in terms of energy savings (recovery of 20+ years). A proper Energy Audit should identify low hanging fruit.
Also smart thermostats can have a significant impact on consumption (say 10% savings). Just the ability to turn the temperature setting up or down remotely (so say up 1 hour before you reach home on a commuting day).
* Chinese coal production and coal imports have been low. A hot summer depleted stockpiles due to air conditioning load. So now China is having power cuts and it (and other Asian countries) are grabbing available LNG cargoes - they are being diverted en route from their original destinations to Asian markets.
At the same time European storage in advance of winter was low due to a cold spring. And Gazprom is not delivering the desired additional flows.
Re: Lock in natural gas price for 2021-2022?
1.69 for retail propane ??/ How is that possible, EIA says the USA wholesale price was 1.63 last week...
https://www.eia.gov/dnav/pet/hist/LeafH ... US_DPG&f=W
Re: Lock in natural gas price for 2021-2022?
The driver did mention they were up to $1.79 but since I had set up the delivery last week I got it for $1.69.jharkin wrote: ↑Mon Oct 11, 2021 9:19 am
1.69 for retail propane ??/ How is that possible, EIA says the USA wholesale price was 1.63 last week...
https://www.eia.gov/dnav/pet/hist/LeafH ... US_DPG&f=W
One of our neighbors called multiple providers at the end of September and the price ranged from $1.69 to $2.76.
Re: Lock in natural gas price for 2021-2022?
Where are you? Region makes a big difference, all heating fuels are expensive in the Northeast....
Re: Lock in natural gas price for 2021-2022?
I've heard with propane it makes a difference if you own the tank. If the dealer owns it, you're stuck. If you own it, you should be able to shop around. At least with fuel oil, everyone owns their tank.
Re: Lock in natural gas price for 2021-2022?
I’m in OK. I knew NE fuel was higher but didn’t expect nearly double.
Back to the OP our little side conversation should be a good reminder that the lock rate offered should only be compared to the rates of your utility/area.
Re: Lock in natural gas price for 2021-2022?
I paid I think 1.79 a month ago to fill my owned buried 1000 gal tank here in Indiana and I thought that was a lot. It’s been weighing on my mind lately with different heating options... I have 5 year old heat pumps with backup propane (under 38 degrees or so). We burn about 1100 gallons a year on average so I typically have to take on 600 gallons first of January . 1.80 or so is what it’s been in the last several Jan fill ups with summer fills around 1.10-1.20. Kinda nervous with possible shortages. I think it went past $4 in 2014! O well, my best move is probably to do nothing different other than maybe turn the thermostat down a few degrees to 63-64.WhatsIRR wrote: ↑Mon Oct 11, 2021 9:42 amThe driver did mention they were up to $1.79 but since I had set up the delivery last week I got it for $1.69.jharkin wrote: ↑Mon Oct 11, 2021 9:19 am
1.69 for retail propane ??/ How is that possible, EIA says the USA wholesale price was 1.63 last week...
https://www.eia.gov/dnav/pet/hist/LeafH ... US_DPG&f=W
One of our neighbors called multiple providers at the end of September and the price ranged from $1.69 to $2.76.
Re: Lock in natural gas price for 2021-2022?
The lock is usually a over the current rates. If you look at what you're paying now, how much higher is the lock rate?crg11 wrote: ↑Sat Oct 09, 2021 7:33 pm I live in Northern New England and for the first time, live in a house with natural gas heating. I saw some headlines recently about natural gas prices surging heading into winter (https://www.cnn.com/2021/09/28/business ... index.html) and expected to be volatile.
This news arrived a couple of weeks after receiving a letter from my natural gas utility about locking in natural gas supply charge for $0.9256 per therm. I have until October 22nd to do that lock in.
I have no idea if this is a reasonable price to lock in at or not, since all of my previous winter heat experience has been with heating oil. Any advise?
My general thought is that the utilities have a much better picture of the market than you do. They will have priced the lock so that they don't lose out in the most likely scenarios. This is very similar to insurance. And like insurance, it buys you peace of mind. Your utility should be able to show you the historical usage of your house. Look at those numbers. If paying 30% more than that would cause financial hardship, it might be worth the peace of mind.
Liberty Gas is NH always offers the lock around this time of the year. You don't get a second chance later into the winter. You also don't have a choice of suppliers like you do with electricity.
I only use it for my stove and hot water heater; I've never bothered with it. (I have an ooooold coal furnace (~1927) that was converted to oil in the 40s or 50s that runs a single-pipe steam system for heat. Seeing some of the other posts, it looks like I'll be paying 50% more for heat this year...)
Re: Lock in natural gas price for 2021-2022?
jharkin is using propane. My post was about home heating oil.Valuethinker wrote: ↑Mon Oct 11, 2021 4:41 am I think your are confusing posters here.
My comment was directed at the OP, not jharkin. jharkin has no choice as to fuel source, barring installation of a Heat Pump.
OP is wondering whether to hedge gas price. It seems that is very expensive right now. So I suggested that unless a sharp uplift in prices would pose a real budgetary problem, that it might be best to wait until next year before hedging (I do believe people should "lock in" their gas price at least a year out, if they can).
You're saying not to lock the price unless a 50% price increase in the price of natural gas is a "great financial hardship" and a "real budgetary problem." I'm pointing out that the OP is already used to paying much higher prices for heating.
The OP is moving from home heating oil to natural gas. Even though natural gas prices are high compared to last year, they are low compared to home heating oil. Even if natural gas prices rise by 50% from today's high prices, they are still low compared to home heating oil.
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Re: Lock in natural gas price for 2021-2022?
I work in the natural gas industry. Wholesale "normal" natural gas prices that we've seen for the last decade are roughly $3/mmbtu, sometimes dropping to $2.
Right now, they're trading at about double that.
I personally wouldn't lock in a price at double what the previous decade averaged. doubled pricing is a lot of incentive for new production to come online.
Right now, they're trading at about double that.
I personally wouldn't lock in a price at double what the previous decade averaged. doubled pricing is a lot of incentive for new production to come online.
Last edited by ensign_lee on Mon Oct 11, 2021 12:42 pm, edited 1 time in total.
Re: Lock in natural gas price for 2021-2022?
LittleMaggieMae wrote: ↑Sun Oct 10, 2021 10:59 am I think you need to set up an account with your natural gas provider and look at your old bills - on line. How much have you been paying for a therm? how has it fluctuated? how many therms per month have you been using?
The OP has already said that there is no good historical data. The data from last winter is when the house was still under construction:
You don't have to rely on data from when the house was under construction. You can get a good estimate of your as-built natural gas consumption in just three weeks.crg11 wrote: ↑Sun Oct 10, 2021 6:47 am One interesting note is our bill does have a very basic historical graph showing roughly how many therms were used while our house was getting constructed, presumably when the house was less efficient since it wasn't fully sealed in until January. I whipped up a quick spreadsheet to estimate our bill depending on per therm and have a rough idea of what a worst case month might look like and we can afford it.
When the thermostat starts turning on the furnace, start taking weekly readings of the gas meter. Plot therms on the y-axis and average temperature (not high temperature) on the x-axis. The slope of the line is therms per degree-week. Divide by 7 to get therms per degree-day, and multiply by the average heating degree-days (HDD) for your location. That will be your total natural gas consumption for the entire heating season.
Natural gas consumption is almost a straight line. It takes two points to make a line, but it takes three points to be sure that it is a line.
Re: Lock in natural gas price for 2021-2022?
At those prices, you could save a lot of money with energy efficiency retrofits. Air-sealing and insulation for starters, but there are many other retrofits that could earn a payback.
A lot of retrofits that are expensive at $1 per therm become good deals at $4 per therm. For example, drainwater heat-recovery can capture about 50% of the heat that's being lost down the drain, but it costs about $1,000 per shower. If you use 50 therms a year per shower, that's a 40-year payback period at $1 per therm, but it's only a 10-year payback period at $4 per therm.
Re: Lock in natural gas price for 2021-2022?
This thread is now in the Personal Consumer Issues forum (home heating).
Re: Lock in natural gas price for 2021-2022?
Why would gas prices continue to go up at this point? I would bet so the bad news is now priced in.
Re: Lock in natural gas price for 2021-2022?
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Re: Lock in natural gas price for 2021-2022?
I am not sure exactly to what you are referring to so here is my supply & demand explanation.
Basically due to severe weather (too hot in Asia over summer; and a late cold spring in Europe) & problems arising from the Covid-19 situation and now the recovery, gas demand is soaring in Asia and high in Europe. There are constraints on pipeline supply into Europe from Russia (Gazprom is saying it has real production constraints). There's a coal shortage in China and India which is tending to mean they consume more gas (you've had a combination of state-ordered cuts due to air pollution goals & flooding due to very heavy rains; also the Chinese are currently not buying Australian coal & Australia is world's largest exporter (not producer)). Wind speeds have been low in western Europe (20-25% below historic) and that has also caused more gas-fired electricity generation.
That drives up the price of Liquified Natural Gas-- gas traded in tankers (about 10-15% of world supply). The US has some export capacity (limited, but enough to cause it to max exports). That tends to push up domestic prices-- again, the effect should be limited.
North America is generally an isolated gas market. All 3 countries produce, Canada both exports to US (in the west) and imports (in the east). Mexico increasingly imports from USA I believe.
US production is highly tied to fracking production, which is tied to the oil price-- gas production is a byproduct of oil production. So with Covid-19 the world price for oil (this is a global market, prices in North America are almost always within say $10-20/bl of world prices) was low. US fracking activity declined. That also mean new gas discoveries declined. EDIT - see other poster below, the effect is probably not significant relative to the simple relationship between gas prices and drilling in primarily gas-producing shale regions.
There's so much gas in US shale that I don't think anyone thinks long term shortages are likely. But a very cold winter, for example, could lead to price spikes and short term supply shortages.
Could North American natural gas prices go up from here? Yes if:
- there's a colder than average winter in the northern hemisphere, let alone a return to the Polar vortexes we have seen
- the import constraints on Europe (by pipeline, from Russia) stay bad, or get worse
Prices are so high in Europe that you are beginning to see "demand destruction" ie large industrial users (chemicals, cement, glass, fertilizer etc) shut down production and sell their gas back into the market. That will happen in Asia at some point although the economics of Chinese consumers (large state-owned companies) might slow that response due to the desire to maintain production.
Last edited by Valuethinker on Fri Oct 15, 2021 9:04 am, edited 1 time in total.
Re: Lock in natural gas price for 2021-2022?
I'm really surprised no one mentioned futures yet, this is the best vehicle to lock in prices, IMHO.
Re: Lock in natural gas price for 2021-2022?
Should be a mild winter, but supply is short and gas prices are forecast to rise. Could be a good year to lock in.
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Re: Lock in natural gas price for 2021-2022?
No, I would not do this.crg11 wrote: ↑Sat Oct 09, 2021 7:33 pm I live in Northern New England and for the first time, live in a house with natural gas heating. I saw some headlines recently about natural gas prices surging heading into winter (https://www.cnn.com/2021/09/28/business ... index.html) and expected to be volatile.
This news arrived a couple of weeks after receiving a letter from my natural gas utility about locking in natural gas supply charge for $0.9256 per therm. I have until October 22nd to do that lock in.
I have no idea if this is a reasonable price to lock in at or not, since all of my previous winter heat experience has been with heating oil. Any advise?
Re: Lock in natural gas price for 2021-2022?
Valuethinker wrote: ↑Fri Oct 15, 2021 5:48 am
US production is highly tied to fracking production, which is tied to the oil price-- gas production is a byproduct of oil production. So with Covid-19 the world price for oil (this is a global market, prices in North America are almost always within say $10-20/bl of world prices) was low. US fracking activity declined. That also mean new gas discoveries declined.
This is kind of correct and kind of incorrect. What you are referring to with the gas produced by oil wells is known as associated gas it’s a product that just comes along as you stated.
The EIA reported that associated gas in the 5 major on shore oil basins accounted for 14.2 BCFD of production in 2020.
https://www.eia.gov/todayinenergy/detail.php?id=49256
Total US gas production was 91.5 BCFD so the associated gas accounts for about 15.5% of total US production.
https://www.eia.gov/energyexplained/nat ... s-from.php
Marcellus, Utica, Haynesville and the Barnett are all predominantly gas shale plays that dominate production. Pennsylvania is the second largest gas producing state in the US driven by the Marcellus.
The shale gas wells are frac’d the same as a shale oil well, fracturing is the only way to produce out of these wells.
The growth of shale oil definitely grew gas production (6.1 BCF/d) but the growth is barely 5% of total US gas production.
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Re: Lock in natural gas price for 2021-2022?
Thank you, that's very interesting to know.WhatsIRR wrote: ↑Fri Oct 15, 2021 8:50 amValuethinker wrote: ↑Fri Oct 15, 2021 5:48 am
US production is highly tied to fracking production, which is tied to the oil price-- gas production is a byproduct of oil production. So with Covid-19 the world price for oil (this is a global market, prices in North America are almost always within say $10-20/bl of world prices) was low. US fracking activity declined. That also mean new gas discoveries declined.
This is kind of correct and kind of incorrect. What you are referring to with the gas produced by oil wells is known as associated gas it’s a product that just comes along as you stated.
The EIA reported that associated gas in the 5 major on shore oil basins accounted for 14.2 BCFD of production in 2020.
https://www.eia.gov/todayinenergy/detail.php?id=49256
Total US gas production was 91.5 BCFD so the associated gas accounts for about 15.5% of total US production.
https://www.eia.gov/energyexplained/nat ... s-from.php
Marcellus, Utica, Haynesville and the Barnett are all predominantly gas shale plays that dominate production. Pennsylvania is the second largest gas producing state in the US driven by the Marcellus.
The shale gas wells are frac’d the same as a shale oil well, fracturing is the only way to produce out of these wells.
The growth of shale oil definitely grew gas production (6.1 BCF/d) but the growth is barely 5% of total US gas production.
I was thinking at the margin (subconsciously)-- where does the extra come from? Certainly when oil prices were high it was a common nostrum that the coproduction of gas ensured that there would be a US supply glut.
From those numbers that's probably not true. The link is more direct - higher gas price means more drilling activity in the gas shale areas - for gas.
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Re: Lock in natural gas price for 2021-2022?
I don't think that's quite correct? The OP saidtalzara wrote: ↑Mon Oct 11, 2021 12:10 pm
The OP is moving from home heating oil to natural gas. Even though natural gas prices are high compared to last year, they are low compared to home heating oil. Even if natural gas prices rise by 50% from today's high prices, they are still low compared to home heating oil.
The OP has *moved* from a house heated by oil to one heated by natural gas. So it's not correct to say "they paid a much higher price for energy from heating oil (in the old house)" to "therefore an increase in the price of natural gas won't matter (in the new house)"? The implicit assumption there is that the 2 houses have the same needs in terms of heat energy? (It may simply be we read the situation differently).I live in Northern New England and for the first time, live in a house with natural gas heating.
So there's no fuel choice. The question is whether to lock in the existing fuel or not. I am suggesting that unless a big increase in prices would cause real pain, it's not worth locking in. The cost of hedging seems to be high. And of course if a price move (in anything) beyond a certain level would cause real pain then one should hedge.
My point stands regardless of what heating oil sells for. Because that's not a relevant number for someone who (only) heats with gas.
My question (re the tolerability of a 50% rise in price of natural gas) is relevant in any case, because of course the OP does not have a choice of heating oil.
Re: Lock in natural gas price for 2021-2022?
You can play around here and see what’s been happening with rig count over the years.Valuethinker wrote: ↑Fri Oct 15, 2021 9:00 amThank you, that's very interesting to know.WhatsIRR wrote: ↑Fri Oct 15, 2021 8:50 amValuethinker wrote: ↑Fri Oct 15, 2021 5:48 am
US production is highly tied to fracking production, which is tied to the oil price-- gas production is a byproduct of oil production. So with Covid-19 the world price for oil (this is a global market, prices in North America are almost always within say $10-20/bl of world prices) was low. US fracking activity declined. That also mean new gas discoveries declined.
This is kind of correct and kind of incorrect. What you are referring to with the gas produced by oil wells is known as associated gas it’s a product that just comes along as you stated.
The EIA reported that associated gas in the 5 major on shore oil basins accounted for 14.2 BCFD of production in 2020.
https://www.eia.gov/todayinenergy/detail.php?id=49256
Total US gas production was 91.5 BCFD so the associated gas accounts for about 15.5% of total US production.
https://www.eia.gov/energyexplained/nat ... s-from.php
Marcellus, Utica, Haynesville and the Barnett are all predominantly gas shale plays that dominate production. Pennsylvania is the second largest gas producing state in the US driven by the Marcellus.
The shale gas wells are frac’d the same as a shale oil well, fracturing is the only way to produce out of these wells.
The growth of shale oil definitely grew gas production (6.1 BCF/d) but the growth is barely 5% of total US gas production.
I was thinking at the margin (subconsciously)-- where does the extra come from? Certainly when oil prices were high it was a common nostrum that the coproduction of gas ensured that there would be a US supply glut.
From those numbers that's probably not true. The link is more direct - higher gas price means more drilling activity in the gas shale areas - for gas.
Last week we added 5 oil rigs (~1% increase) and 0 gas rigs.
https://rigcount.bakerhughes.com/na-rig-count