The War In Ukraine Could Bring Higher Winter Heating Bills In The US: How Investors Can Make Up The Difference

Zinger Key Points
  • Natural gas production in the U.S. is at an all-time high, but inventory is at historical lows.
  • Export opportunities in the European market have caused domestic prices for natural gas to rise.

U.S. households that primarily use natural gas for heating will spend an average of $931 on heating during the October to March winter season, according to a recent report by the U.S. Energy Information Administration. 

That’s 28% more than they spent last year.

As expected, natural gas producers are making extra profits with prices rising well above averages for the last 10 years. These include companies like EQT Corp. EQT, Coterra Energy CTRA, Southwestern Energy SWN and Chesapeake Energy CHK, Chevron CVX and Exxon Mobile XOM.

See Also: Mild Winter Ahead In Europe? Here's What Natural Gas Prices Are Reflecting

Furthermore, the EIA is expecting household consumption of natural gas to climb 5% this year due to possible colder temperatures. But even as consumption and prices rise, those invested in the stock market could see their higher heating bills balanced out by gains in share prices.

After all, ETFs in the natural gas sector have largely outperformed the market in 2022:

  • The United States 12 Month Natural Gas Fund LP ETF UNL has risen 72.5% since January.
  • The United States Natural Gas Fund LP UNG is up 55% since January.
  • The iPath Series B Bloomberg Natural Gas Subindex Total Return ETN, an exchange-traded note, is up 57.8% since January GAZ.

New England Faces Expensive Winter

When it comes to natural gas prices, the U.S. is in a much better position than the European Union, where prices have risen sharply due to the war in Ukraine and Russia's cutting the region off from its pipelines.

Still, natural gas is the primary heating source for approximately 47% of U.S. homes as well as the largest source of electricity in the country. And prices are expected to spike again in December and January as temperatures plummet.

New England is in a tough spot due to a lack of natural gas pipelines, which forces the region to rely on liquefied natural gas shipped from overseas.

Anticipation for the winter built up strong demand for natural gas imports, which could lead to New England and the Northeast region seeing larger spikes in energy prices than other parts of the country.

The Midwest is another region that is likely to see natural gas prices spike above the national average, according to Energy Information Administration data.

Global LNG Exports

The U.S. produces so much liquified natural gas that it’s about to become the world’s largest exporter, according to Forbes. This has had tough consequences for domestic natural gas prices.

U.S. companies now prefer to export rather than supply to the local market given that substantially better prices are paid abroad.

Average natural gas production in 2022 has surpassed all previous years and is in line to reach a historical record. But while production is at an all-time high, the inventory of natural gas is at historical low, according to Reuters.

The U.S.’s incursion into the global exports market comes at the expense of American homes, but helps European allies. Earlier this month, the White House ruled out a ban on limiting natural gas exports to Europe for the coming winter as an act of friendship amid geopolitical tension.

Shutterstock image.

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