NGA ISSUE BRIEF: Natural Gas Price Trends

Key Points
  • U.S. EIA stated on Oct. 12, 2023: "We expect wholesale natural gas prices to be 14% lower this winter than last winter, driven by higher U.S. natural gas production and robust natural gas inventories, leading to 21% lower retail natural gas prices for households."
  • EIA data indicates that natural gas remains the lowest cost home heating source in the Northeast and nationally.
  • Spot market prices in the Northeast can be extremely volatile during high demand periods (such as the winter), reflecting high demand and infrastructure constraints.
  • It should be added that natural gas utility "firm" customers, such as residential heating consumers, are to a great extent protected from these market price swings due to utility planning and supply portfolio management.
  • Natural gas utilities offer budget billing plans, efficiency options, and information on federal funding support for low-income households, to help customers manage winter energy costs.

The key variables in natural gas price formation generally include production levels, demand growth, the state of the economy, storage levels, weather, and alternate fuel prices.

The outlook as of October 2023 is for natural gas commodity prices to be lower this year in the U.S. after quite volatile prices in the previous two years. 2021 saw higher commodity prices for all fuels, including natural gas, as supply chain and transport issues challenged the global delivery market. The trajectory for energy commodity prices in 2022 was even higher, as a result of inflation and the impact of Russia's war on Ukraine.

On October 12, 2023, the U.S. EIA stated that "We expect wholesale natural gas prices to be 14% lower this winter than last winter, driven by higher U.S. natural gas production and robust natural gas inventories, leading to 21% lower retail natural gas prices for households."

EIA also noted in October 2023, in its annual "Winter Fuels Outlook", that natural gas would be the lowest cost home heating energy source in the Northeast for the 2023/24 winter (see chart below on right).


Short-term volatility reflecting delivery constraints during periods of high demand and cold weather do occur, especially in regional markets. The Northeast region, for instance, remains among the most price-sensitive markets in the country, reflecting its pipeline constraints.

Utilities have in place long-term supply and storage arrangements, and their "firm rate" customers, such as residential heating customers, are to a great extent protected from spot market fluctuations. As the U.S. EIA has observed: "Residential customers see less [price] variation because their bills reflect monthly average prices, which do not fluctuate as much as daily prices. Also, many residential customers stabilize their monthly bills by participating in yearly budget plans provided by their local gas distribution companies."

EIA notes that for New England and New York, "Pipeline constraints still exist in the area, and day-to-day price volatility is likely." Spot market volatility is most prone to impact "non-firm" or interruptible customers, with particular impacts on the power sector in the region, and thus ultimately electric customers. The Northeast region - a high-demand region but one characterized by pipeline infrastructure constraints - has experienced periods of some of the highest gas and power spot price volatility in the U.S. over several recent winters.

In its 2022 energy market review published in March 2023, the FERC noted the high-price fundamentals of the Northeast gas market due to capacity limitations. The agency stated that: "Due to constrained pipeline capacity into New England, segments of the region's pipelines often reach their maximum capacity in wintertime. Prices at Algonquin Citygates frequently reflect winter scarcity as well as the region's reliance on LNG imports to supplement pipeline supplies. As global demand for LNG increased, natural gas prices in New England also rose, reflecting the effects of the tight international market on the region."

Gas utilities in the region offer budget billing plans and efficiency programs, and LIHEAP funding from the U.S. government remains important for lower-income households. While natural gas remains the most affordable home heating fuel, programs such as these, and the opportunities for infrastructure capacity additions, remain key to helping serve customer needs and the needs of the local economy.

Daily Energy Prices, U.S. Energy Information Administration (EIA)

Natural Gas Price page, U.S. EIA

U.S. EIA table of Northeast households by fuel type and average expenditures, Table WF01, released October 2023