By C.T. Barnes
Published in Las Cruces Bulletin 5.27.22
New Mexicans are feeling the pinch in rising fuel prices and your May gas utility bill is no exception. Just like oil, natural gas prices are on the rise, the question is how high and how long will the increase last.
Normally the price of natural gas decreases or stabilizes in non-winter months, this is not the case currently as the commodity has risen due to several factors ranging from power generation to war.
“We have not seen this type of behavior for at least 10 years regarding price level and volatility during the summer months” said LCU Gas Business Analyst Mario Puentes. The balance between demand for natural gas and the supply to meet that demand is quite narrow. The current factors to consider include the generation of electricity, the export of liquefied natural gas (LNG) overseas, and the Russian invasion of Ukraine.
The closure of coal fired powerplants, which historically generated electricity, led many utilities to switch to natural gas to produce electricity for consumers. This diverts natural gas from storage for winter to meet electricity demands during the hot summer months. “The natural gas supply-demand balance is quite tight right now, one of the telling statistics proving this condition is that nationwide storage is about 380 billion cubic feet less than 1 year ago,” Puentes said.
Another key factor in the price increase is LNG, which is natural gas turned into liquid to store and transport it safer and easier. LNG is being sold at high prices to consumers in Europe, China, and Japan. “Prices for LNG overseas are much higher than they are here, in order to keep that commodity from going overseas may lead to higher prices here in the United States,” Puentes added.
Another key component of the current natural gas market sentiment is the U.S. commitment as an ally to help fill the demand for natural gas that Europe historically purchases from Russia. “Even before the war there has been a big market overseas for LNG over the past several years,” added Puentes.
LCU predicts that price volatility and possibly higher prices will continue until the supply and demand balance is viewed healthy and stable by the general marketplace. “It is important for Las Cruces citizens to know that any natural gas price increase is directly passed on to the customer, LCU does not profit on the cost of gas, our obligation is to satisfy the demand for natural gas to all of our customers. Therefore, we make every effort to obtain the best prices we can for our consumers,” Puentes ended.
LCU – Your Utility Connection. Customer Central can be reached at 575-541-2111 from 8 a.m. - 6 p.m. Monday through Friday. LCU provides clean, safe, and reliable services to Las Cruces residents and businesses. Learn more at: las-cruces.org/180/Utilities
For emergencies, call Dispatch at 526-0500.
PHOTO 1: LCU staff member checking natural gas meter-Courtesy LCU