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Rising energy prices: what to expect

Many Americans are seeing a jump in heating bills due to dropping temperatures and rising energy prices. According to the National Oceanic and Atmospheric Administration (NOAA), it’s actually slated to be a warmer and dryer winter than usual, with above-average temperatures predicted across most of the U.S. due to LA Niña climate conditions – but you should still be prepared for higher than normal heating and electricity bills due to the rising cost of natural gas (and other fossil fuels) across the world. In this article, we’ll explain why energy prices are increasing, where the increases are most dramatic, and how you can protect yourself from the volatility of fossil fuel energy sources (spoiler alert: going solar will help!). Find out what solar + storage costs in your area in 2023

Key takeaways

  1. Natural gas prices are anticipated to be higher this winter than last winter – the East South Central region will be hit the hardest in the U.S.

  2. On average, EIA predicts natural gas heating bills to increase by 28 percent or about $200 more cumulatively between October 2022 and March 2023.

  3. Electricity bills will also increase for many Americans, with National Grid customers in eastern Massachusetts expecting a 64 percent uptick in bills.

  4. The best way to protect yourself is to electrify your home: with solar, storage, and air source heat pumps, you can significantly reduce your reliance on volatile fossil fuel prices.

  5. Visit the EnergySage Marketplace to save on your energy bills by going solar!

What’s in this article?

What factors impact the cost of natural gas?

First, it’s important to note that we’re not economic experts, but understanding what influences the average price of natural gas really boils down to one simple concept: supply and demand. When supply exceeds demand, natural gas prices will drop, but when demand approaches or exceeds supply, you can expect prices to increase. According to the U.S. Energy Information Administration (EIA), natural gas supply depends mainly on a few factors, such as how much natural gas is produced, how much natural gas is currently in storage, and how much natural gas is being imported and exported from the U.S.

On the demand side, winter and summer weather variations – such as extreme cold or heat – will impact how many people need natural gas. Economic growth also leads to higher demand as the commercial and industrial sectors consume more natural gas to produce greater quantities of goods and services. Finally, the cost and availability of other fuel sources will impact the demand for natural gas: if oil prices skyrocket, more people may switch to natural gas, thereby increasing demand.

Why are natural gas prices increasing now?

Over the past few winters, we’ve had a couple of streaks of really cold days – including the infamous Texas Freeze – and this past summer, we saw heat wave after heat wave! Even though this winter is anticipated to be warmer than usual, we’re still paying for these past weather events due to spot prices. Spot prices of natural gas reflect the current price it’s being bought and sold at on the market – but the price that’s actually passed onto us as consumers is the retail rate. Generally, retail rates only change a few times a year, depending on where you live. So, when these extreme weather events occurred in the last 12 months, the price you were paying for natural gas was already set and didn’t account for the dramatic increases in spot prices. Now, to recoup the increased costs utilities paid to procure natural gas, they’re raising retail rates throughout the year. 

Another significant factor at play right now is economic growth: more and more businesses are growing, and consumers are returning to more usual behavior after the shutdowns that occurred at the start of the pandemic. Higher demand for goods and services means greater production, which requires more natural gas. However, natural gas production has remained relatively constant, so as demand for gas approaches ever closer to the supply, we see prices increase.

Is natural gas more volatile in the U.S. compared to other countries?

Despite these considerable price hikes, the U.S. is better protected from natural gas volatility than most other countries. We’re the world’s largest natural gas producer, so we generate the natural gas we consume (instead of relying on other countries for imports). Last year, European countries experienced surging natural gas prices because they depend on Russian exports for natural gas, making them much more vulnerable to shortages. Russia had limited supply (primarily due to the war in Ukraine) and Europe’s inventory levels were depleted, so Europe experienced record-breaking gas prices. After over a year of historically high natural gas prices, European gas prices are finally predicted to fall by about 30 percent in the next few months, according to Goldman Sachs.

How will your heating bill be impacted?

In 2020, approximately 48 percent of U.S. households depended on natural gas as their primary heating source, according to the U.S. Census Bureau. If you’re one of these households, you’ll likely see heftier natural gas bills this winter (if you haven’t already). According to the EIA, households relying on natural gas can expect to pay about 28 percent more this winter than last winter – or about $200 more in gas bills cumulatively between October 2022 and March 2023. However, your location will also impact how much you’re paying, with the Midwest seeing the most dramatic price increases.

Are the costs of other heating sources also rising?

Your heating bill will likely increase no matter what fuel source you consume. According to EIA, if you rely on oil as your primary heating source, your heating bill will increase by 27 percent, and if you use propane, it will increase by five percent. Your bill will also increase by about 10 percent if you rely on electricity for heating (because U.S. electricity is still predominantly generated by fossil fuels). If the winter turns out to be colder than expected, these numbers could rise even further, but if it ends up being warmer and you need less heat, you might not see dramatic increases.

How will electricity prices be impacted?

The price of electricity will also increase this winter due to rising natural gas prices – natural gas power plants are currently the largest source of electricity generation in the U.S., producing about 38 percent of our country’s needs. It’s used to power steam and gas turbines, which generate the electricity we use in our homes. However, depending on the electricity mix where you live, how much electricity you consume, and if you generate and consume renewable energy (like solar!) at your home, you may be better protected from increasing electricity rates. 

Which states consume the most natural gas?

Some states consume more natural gas than others – though this doesn’t necessarily indicate how much the price will increase in the state. Many states that consume more natural gas also produce more natural gas, meaning their distribution costs are lower and, thus, the retail rates consumers in that state pay are also lower. For example, Texas consumes the most natural gas of any state but produces the most fuel.

On the other hand, Hawaii consumes the least natural gas but doesn’t produce any. California has the most residential consumers of natural gas (due to its large population) but has a lower total consumption than Texas. Explore the table below to learn how much natural gas your state consumes and produces and the total number of residential natural gas consumers.

2021 natural gas consumption and production by state STATETOTAL CONSUMPTION (MILLION CUBIC FEET)TOTAL DRY PRODUCTION (MILLION CUBIC FEET)TOTAL NUMBER OF RESIDENTIAL CONSUMERS Alabama710,424104,185787,783 Alaska391,656333,617138,362 Arizona470,5182291,330,138 Arkansas351,716447,985567,968 California2,092,612133,13611,232,552 Colorado497,1871,686,5231,867,050 Connecticut299,4970584,002 Delaware82,3820190,281 District of Columbia27,4580155,091 Florida154,1411711840,152 Georgia768,30501,881,936 Hawaii2,783029,059 Idaho129,2121,312441,607 Illinois1,107,8112,1033,973,048 Indiana827,2404,0631,812,881 Iowa386,2700951,735 Kansas282,981139,122884,427 Kentucky352,81170,373786,902 Louisiana1,751,4993,405,256927,647 Maine51,797038,421 Maryland292,16951,188,292 Massachusetts392,52401,581,946 Michigan901,91671,4523,379,955 Minnesota489,87201,602,690 Mississippi567,32727,566429,652 Missouri294,61101,444,001 Montana81,62437,453287,380 Nebraska181,472327553,328 Nevada294,1614922,888 New Hampshire58,2520113,574 New Jersey672,93402,904,352 New Mexico276,0332,041,715609,186 New York1,318,5609,7084,559,338 North Carolina611,72201,367,653 North Dakota182,563798,701152,032 Ohio1,205,0842,234,6183,427,853 Oklahoma712,2402,313,874967,703 Oregon282,060205788,177 Pennsylvania1,807,7727,526,5902,864,907 Rhode Island96,8520247,368 South Carolina339,8540758,356 South Dakota90,153161201,101 Tennessee400,4003,5861,212,909 Texas4,666,0218,500,4935,010,686 Utah260,749230,7671,029,304 Vermont13,272048,229 Virginia668,87995,9721,280,027 Washington348,67101,251,963 West Virginia258,6872,537,691336,296 Wisconsin542,61801,823,385 Wyoming152,8551,055,521170,833

Where are natural gas prices anticipated to rise the most?

Natural gas prices vary substantially depending on your energy market. While New England has the highest natural gas prices overall, the largest price increase between 2022 and 2023 will occur in the East South Central region of the U.S. ($2.86/thousand cubic feet), according to the EIA. In 2023, the EIA predicts natural gas prices to rise everywhere except West South Central, where prices are expected to drop by $0.18/thousand cubic feet. Past, present, and future retail natural gas consumer prices by region (in dollars per thousand cubic feet)

Past, present, and future retail natural gas consumer prices by region (in dollars per thousand cubic feet) Region201920202021202220232022 to 2023 change New England$14.72$14.73$16.12$19.44$19.48$0.04 Middle Atlantic$11.64$11.76$12.55$14.61$15.29$0.68 East North Central$8.39$8.38$10.19$12.41$13.41$1.00 West North Central$8.75$8.69$10.23$13.36$13.59$0.23 South Atlantic$13.52$13.88$15.24$17.32$17.88$0.56 East South Central$11.06$11.13$11.99$14.29$17.15$2.86 West South Central$10.46$11.32$13.22$15.66$15.48$-0.18 Mountain$8.25$8.40$9.77$11.87$12.86$0.99 Pacific$12.23$13.38$15.25$19.14$19.14$0.83 National average$10.46$10.76$12.21$15.60$15.60$0.46

Source: U.S. Energy Information Administration, Short-Term Energy Outlook Data Browser

Case study: Massachusetts

Let’s look at an example in Massachusetts to understand how these rising power prices could impact you. I live in eastern Massachusetts and received an email from my utility company, National Grid, in September 2022. National Grid is a regulated energy distribution company that provides energy to millions of customers in states across the northeastern U.S.

For its Basic Service, National Grid changes the retail cost of electricity twice a year: on November 1 and May 1. Their email stated that on November 1, 2022, electricity prices would increase: assuming I consume 600 kilowatt-hours (kWh) of electricity in a month, National Grid anticipates that my bill will increase about $114, or 64 percent, compared to last year! This rate hike will be in effect until April 30, 2023. National Grid is also looking to increase its natural gas rates, which would increase the price by about 22 percent compared to last year.

If you live in Massachusetts, the impact of these rate increases will ultimately vary depending on how much energy you use, your energy provider, the rate you’re on, and the weather conditions in your area.

How can you protect your home from rising natural gas prices?

Nobody wants to pay more for the energy you need to power your home – but the good news is that there are steps you can take to protect yourself in the future! In addition to improving your home’s energy efficiency, you can also electrify your home, which makes you much less vulnerable to volatile fossil fuel prices. Here are the steps to get started electrifying your home.

1. Install air source heat pumps

Most heating technologies, such as a natural gas furnaces, modify your home’s temperature by generating hot air, which circulates throughout your home. However, air source heat pumps work differently. Instead of generating heat, they transfer heat from one place to another (with a heat exchanger leveraging the difference between the temperature inside and outside your house), making them highly efficient. Importantly, air source heat pumps run on electricity, meaning that as long as your electricity comes from a renewable source like solar panels, you can substantially reduce – or even eliminate – your heating bill. 

2. Install a solar system

Next, to power your heat pumps, you’ll want to install solar panels: unlike natural gas, a finite fossil fuel, solar is a renewable energy, meaning the supply is endless – so you don’t need to worry about supply and demand. By installing solar, you can significantly lower your electricity bill, protecting you from the inflation and market volatility associated with fossil fuels. Over 20 years, the average home can expect to save between $10,000 and $30,000 on residential electricity costs if they go solar.

3. Install energy storage

Even with solar, you’ll still need to use electricity from the grid when the sun isn’t shining – and the grid is still dominated by fossil fuels, with only about 20 percent of the nation’s electricity coming from renewables. However, with energy storage (AKA solar batteries), you can store the excess energy generated by your solar panels for use when the sun is down, allowing you to substantially reduce your reliance on the grid and fossil fuels like natural gas.

How can policies protect Americans from energy volatility?

Supporting policies that expand renewable energy in the U.S. is another significant step to help protect yourself (and others) from volatile fossil fuels in the future. Keep in mind that low-income households are the most significantly impacted because they have higher energy burdens. Because the wind and sun are unlimited “fuel” sources, the price of energy generated by them is not subject to supply and demand in the same way as fossil fuels.

Thus, while the price tags associated with some legislation may come with sticker shock (like the recently passed Inflation Reduction Act), ultimately making the grid cleaner and electrifying as much as possible – including transportation – will translate to lower energy costs for you and your neighbors. Just look at the rising gasoline prices right now: if you drive an electric vehicle and power it with solar energy, you’ll protect yourself from the volatility of driving a gas-powered vehicle. Check out this article to compare the cost of charging a Tesla with filling up your car with gas.

Start electrifying your home today through EnergySage

If you’re looking to protect yourself from rising natural gas prices (while reducing fossil fuel emissions and combating climate change), consider going solar! When you sign up for free on the EnergySage Marketplace, you’ll receive up to seven custom quotes from installers in your area. By comparing these quotes, you can find a system that meets your needs at the right price. Ultimately, you’ll be able to save on your utility bills while generating clean energy right at home.

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