Natural gas production will reach record highs in time for the Fourth of July, according to the federal government, but that may not mean much for consumers who are expected to pay more for their electricity this summer.
The Energy Information Administration on Tuesday, in its monthly short-term energy outlook for June, said that increased demand for air conditioning in a hot summer will surpass record production of natural gas to bring prices about 5 percent higher for consumers.
“U.S. natural gas production is expected to reach a record in July,” said Adam Sieminski, the administrator of the Energy Department’s data and analysis wing.
Since the natural gas storage season started in April, inventories have been higher than the previous five-year average, according to the outlook’s summary. For the week ending May 29, the increase was the largest in more than a decade.
Nevertheless, prices for the fuel are projected to creep higher over the summer. And with the rise in natural gas prices, Americans can expect to pay more to cool their homes, the outlook says.
Natural gas prices have reached historical lows in recent months. And with more of the nation’s electricity coming from combined-cycle natural gas power plants, it would seem the low prices would bode well for consumers.
However, the normal supply-and-demand scenarios do not seem to be in play in this case, according to the outlook. It says natural gas prices will begin creeping higher this summer because of increased demand for electricity to cool homes and businesses. That means Americans can expect to pay higher prices for electricity this summer.
Summer electricity costs for the average consumer will rise nearly 5 percent as a result of higher demand converging with higher prices, the outlook said.
The National Oceanic and Atmospheric Administration “forecasts warmer summer temperatures this year compared with the mild summer last year,” the outlook says. Its adds that the warmer temperatures are projected to “increase consumption of electricity to run air conditioners, which, combined with higher electricity prices, contributes to EIA’s forecast of a 4.8 percent increase in the typical U.S. residential electricity bill this summer” compared with last year.
“This increase in the average residential bill reflects a projected 2.6 percent increase in average electricity usage and a 2.1 percent increase in the average retail price of electricity,” the outlook states.
At the same time, the outlook shows that demand for coal continues to decline.
“Lower natural gas prices are the main driver of the decline,” EIA says. “Projected low natural gas prices make it more economical to run natural gas-fired generating units at higher utilization rates even in regions of the country (Midwest, South) that typically rely more heavily on coal-fired generation.”
