Natural gas has been significantly rising in 2022 due to a variety of factors. One of the key factors is Russia’s invasion of Ukraine, which resulted in the Russian natural gas supply being cut off. As a result, the EU, which is heavily reliant on Russian gas, must seek alternative sources, disrupting the normal supply chain. Furthermore, inflation in 2022 may play a significant impact in the quick rise in oil prices.
On Wednesday, natural gas prices surpassed $9 per million British thermal units or MMBtu. This is the first time in almost a decade as decreasing stockpiles pushed up prices.
US price increased more than 6% at one time, reaching a high of $9.399 per MMBtu, the highest level since 2008. Later in the day, the contract returns the majority of its gains, closing at 1.99% higher at $8.971 per MMBtu.
However, prices have remained high in what has been a ferocious rise for natural gas. Russia’s war in Ukraine has sent energy markets into a whirling.
Little production growth, high liquefied natural gas exports, and storage around 17% below the five-year average are three major causes. This analysis was given by David Givens, head of natural gas and power services for North America at Argus Media.
Inflationary pressures are increasing across the economy as prices rise quickly. Drivers are already dealing with record-high gas prices, and electricity expenses seem to rise as well. While utility companies may have moved to coal as a cheaper alternative, coal-fueled power is now in short supply. Some plants are shutting down owing to ESG — environmental, social, and governance — concerns.
Natural gas prices went up about 30% in May. This is the third month increase in a row where price has increased above 20%. The overall gas price for 2022 is up around 150% which is more than double.
If the situation between Russia and Ukraine does not escalate soon, there is a high probability that natural gas prices will continue to climb. Furthermore, the rise in natural gas prices may be contributing to this year’s rising inflation. As a result, the general individual should anticipate an increase in the price of commodities as well.