Natural gas accounts for 42% of electricity generation. It’s feedstock for fertilizers. It’s widely used for heating. And 19% was exported in 2024.
By Wolf Richter for WOLF STREET.
The notoriously volatile price of US natural gas futures has been zigzagging higher since mid-2024 and overnight spiked to over $4.80 per million Btu, and currently trades at $4.52 per million Btu, up by 140% from a year ago.
Nearly 43% of electricity in the US was generated by natural-gas-fired power plants in 2024. Natural gas is widely used for heating by residential, commercial, and industrial customers. Fertilizer makers use natural gas as feedstock. Natural gas is used as fuel for city buses, drayage trucks, garbage trucks, etc. And the US has been investing in a massive export boom of natural gas, with exporters taking up 19% of US production last year. 
For the past 20 years, it has been drill-baby-drill, and US natural gas production has more than doubled, turning the US into the largest natural gas producer in the world. Overproduction has caused the price of natural gas to collapse repeatedly.
Over the past three decades, natural gas prices spiked to $10 per million Btu and higher, including to over $15 in 2005. Natural gas prices can go wild. And in 1997, natural gas had already been at $4.50.
Power generators, utilities, and fertilizer makers purchase much of their projected needs with long-term contracts, so price changes in the futures market leave their near-term costs largely unaffected. But they might raise their prices anyway, and many have already done so, blaming the higher costs. Regulated utilities will do what regulators let them do.
The CPI for natural gas piped to the homes across the US has risen by 6.4% since August (through January, February CPI will be released on Wednesday) and is up 4.9% year-over-year.
Electricity prices have risen because regulators allow utilities to hike their prices. In California, for example, PG&E’s electricity prices have spiked with multiple price hikes and fee changes, as it passes on the costs of the settlements related to wildfire destruction, the costs of their wildfire mitigation efforts, other costs, and whatever, while its net income surged to $2.5 billion in 2024.
National storage levels are running near the bottom of the five-year range for this time of the year, at 1.76 trillion cubic feet, down from 2.34 trillion cubic feet a year ago, when they were forming the new top of the five-year range.
Forecasts for milder weather indicate that there will be less heating-related demand.
But export demand, both via LNG to the rest of the world and via pipeline to Mexico, is a booming business and rose to 7.7 trillion cubic feet in 2024, using about 19% of US production in 2024.
In January, Trump had lifted the freeze on LNG export permit applications for new LNG export terminals. Biden had paused approvals of permits for new export terminals in order to curtail future growth in demand from LNG exporters that could drive up wholesale prices of natural gas in the US. Since lifting the freeze, the Trump administration has approved four new LNG export projects and extensions of existing projects.
It has become a huge business. And this demand from exporters comes on top of the growth in demand from power generators scrambling to provide electricity to new data centers (for AI and the cloud), which are enormous power hogs, and which are spouting like mushrooms.
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On top of an extra 25% for anyone purchasing electricity that has been sourced from Canada. But of course, tariffs don’t impact prices!
Well, natural gas export will improve the trade balance in favour of the USA.
Yes, exports of oil, petroleum products, and natural gas are a big factor in US trade. Without it, our trade deficit would be vastly more abysmal.
Wolf, just two stocks (Nvidia and Tesla) lost approx. $2 Trillions in imaginary dollars in under 2 months. Has to be a record of sorts.
Tesla lost half since I shorted it at $470 (posted here). I declare victory and move on. Still holding Nvidia puts (among few others). Also Eli Lilly.
They key word in your comment is “imaginary.” Your profits aren’t real until you sell. Most homeowners, for example, have not grasped this simple concept.
I read “I declare victory and move on” to mean he’s selling and taking profits.
Somehow the real dollars are always “on the sidelines”.
But TSLA and NVDA are both still up 25% from a year ago, despite the plunge. This whole place is a joke.
lets see where that stock goes when revenue/sales is reported. kind of weird to price a hypergrowth stock with a 120 PE when sales are down 50%… unless of course your faith in pure unbridled corruption is the center of your investing portfolio.
I feel dumb because I can’t actually short stocks in my retirement , so instead I bought shares of TSLQ (2x inverse) about 6 months ago. Just a small amount, for fun. Well, TESLA is basically back to where it was 6 months ago, yet I’m still missing half my money I put into TSLQ. I don’t get it. There’s some math I don’t understand with this inverse ETF stuff, or it fails to capture the long term trend. Just a daily thing I guess.
“There’s some math I don’t understand with this inverse ETF stuff…”
Correct. Never ever buy inverse ETFs except for day-trading purposes. It’s NOT a long-term bet because it will eat itself up regardless of what the stock does. Look at a long-term chart (minimum three years) of any of them. There are other things out there like that. For example, to stay within the topic of this article: UNG, which is a bet that natural gas futures prices will rise, eats itself up at an astounding pace. Natural gas futures prices are up 140% yoy. And UNG is up only 52%. When futures prices plunge 50% over a year, it will plunge 80%. It has been around since 2007 and lost 99.999% or whatever of its value (from reverse-split adjusted $8,000 at the peak early on to $23.83 today. FOR DAY-TRADING ONLY.
…love the auto-whatever: ‘reverse-spit’, or in other words, ‘choke’!
may we all find a better day.
I use short leveraged ETFs like SOXS or NVD (mostly options in those ETFs), but will not make it a long term hold. There are these things called contango and backwardation that will eat away at these ETFs. SQQQ holds better than others, but it will also go down (all else being equal).
For longer term short your best bet is longer term out-of-money puts (these need to be bought when vix is low and market momentum is up). Once everyone is spooked it’s too late. Puts will also lose time value and most will expire wothless. You sell when you can, not when you want to.
Then there is cash, and it is king once in a blue moon..
As a PG&E customer I note “PG&E Corporation’s CEO, Patricia Poppe, received a total compensation of $17 million for the year to December 2023, which includes a salary of $1.4 million and $11.8 million in stock awards.” While I am basically a capitalist pig, no worker is worth $17 million a year. Utilities are supposed to be highly regulated. They are basically monopolies. Why should customers pay for the settlements of lawsuits due to negligence of management? Take the money out of the compensation of current officers and claw back compensation (with interest) from former officers, the ones who caused the problems. They should be put in jail because of the large number of people they killed because of their negligence. It’s not like we have much of a choice with which utility we use. They are monopolies in most markets.
These corporate guys are paupers compared to some pro sports players.
But I don’t have to watch sports or pay to go to a sporting event. I pretty much have to have electricity and, in my place, natural gas. In cold climates, you need them to survive. I guess I am arguing utilities should be nationalized, like the interstates, like the military.
They kinda already are, as you pointed often being monopolies, but they are highly regulated and controlled locally. I doubt a fully nationalized system would be any more efficient. Just another layer of bureaucracy to manage what is often very unique local electrical sources and demands.
BTW, regarding interstates, the Federal government helps to fund construction costs but state and local governments maintain them.
…reminds me of the old full-page print ads in ‘Life’ and ‘Look’ extolling the virtues of ‘investor-owned power and light’ companies. Surely the demands of selling those stonks and delivering their dividends to the investors (and, of course adequately-compensating the management that facilitate the process) must come first! (/s).
More seriously, is the still-unsettled question of how best to provide public infrastructure and access that adequately serves and best-levels a putatively-competitive economic environment?
may we all find a better day.
You really think these athletic actors get paid that much as advertised by the msm…Okey dokey…the same msm wh8ch spouts propaganda, corporately owned and who’s mission is to mask reality on a targeted populace…ps…All sporting events are sports entertainment not competition…ask Jimmie the bookie or fanduel
A lot of this could be fixed and some kind of fairness coming back by simply bringing back the income tax brackets that existed post WW2 when pretty much everyone except the superrich felt there should be a 90% tax bracket for folks like the mentioned CEO. Congress could fix this easily if, repeat if, they worked for the electorate instead of the super rich.
Wolf may not say it, but I will – we are being
F***ed on all fronts. This is all-out ‘wore’.
140% in ONE friggin year…are you kidding me?
Nothing justifies a 140% increase in one year. This is intentional! It’s to squish the middle class.
But that’s the price in the futures market. In terms of what you’re paying, results may vary.
Just wait until the domestic US natural gas price starts hitting the price people in other countries have to pay. Some countries pay anywhere from 3 to 5 times as much for residential natural gas
Bet you that people will be moaning about shutting all those coal fired generators….
Stocks going down hard. Didn’t we use to have a PPT, plunge protection team? If so, they must be getting calls from current administration.
The entire PPT, who were all working from home, was fired by some kid at DOGE in January.
lol, literally
I found out that the kid at DOGE, who is doing all the firing, is a 19 old high school dropout, who has the nickname “Big Balls” .
Interesting times
There is a plunge protection team but it is not who you think it is. The real PPT is the millions of 401K/IRA owners who buy a certain amount of stocks every payday and that will continue on for pretty much ever. The other part of this team is the private equity folks who buy up public corps and take them private thus reducing the number of publicly traded companies.
Louie
“The real PPT is the millions of 401K/IRA owners who buy a certain amount of stocks every payday”
By the time Musk gets through with them, they may not have any job nor any money to put into their 401K/IRAs. Worse yet, they may have to raid their 401K and pay a penalty just to pay their mortgage or rent.
The PPT guru, former treasury secretary Paulsen, has now retired and is a full time bird watcher.
I miss the days my gas meter was broken. I was billed $13.50 for 3 years, even though my actual bills were much higher. After they fixed the meter I am now getting billed the full value for my gas usage. The recent bill was $270 because of the cold January here in the east coast, and the gas price increases. I want those old days with the broken meter back. I want free stuff.
I want my MTV