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!
Yeah, I thought it was going to be red states and they go and charge blue states extra. Wtf Canada ?
You know everyone has a hospital stay a couple times in their life, chill. We’ll be out at some point.
Electricity via hydro costs about half via nat gas. Aluminium uses so much electricity to make aluminium from bauxite ore via the Hall process it has been called ‘frozen electricity’. All the Canuck AL plants are near big hydro electric stations. If you are hell- bent on metal tariffs it would make more sense to tariff steel at 100% and leave AL alone.
PS: meant 50 % on steel or double the 25% proposed on both metals.
Nick Kelly
You STILL don’t get it. Tariffs are designed to change the math of the costs in order to shift production over the longer term to the US, including aluminum production. Get used to it. I have no idea why this is so hard to grasp.
First need to make production of AL competitive: big rivers to dam to drive the hydro. The biggest hydro plant in US, Hoover, warned in last year or two it might have to halt production due to the ongoing drought that has exposed about twenty feet of bleached rock that can still be seen.
The warning went beyond ‘no power’: if drought continued it might go ‘dead pool’ where water would no longer flow downstream. Then there was some rain and disaster averted.
Comparative advantages do exist. Most of the precipitation in North America falls in the north, but the sun doesn’t. Canada COULD grow its own citrus using cheap hydro electricity for grow lights in giant green houses. But it would always be cheaper to buy it from California.
There is strategic self- sourcing, where an adversary might cut you off from something you must have. So you self- source regardless of extra cost. Hopefully this is not the case here.
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..
The double option stocks that are zooted on meth are not a smart play.
It doesn’t make you look any smarter to either double your winnings or double your losses on any given day.
Yeah you could place 2 identical bets on the Miami dolphins but your bookey is coming to collect on Monday no matter what. Why double it?
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
I’ve always thought their salaries are made up.
Look how much their house they are living in costs.
Do the math. And tbh 9/10 sports in the world are predetermined.
Sorry
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
You guys really do not understand these “kids” who work for DOGE. These folks are most definitely on the spectrum with super genius level IQs in hacking, coding, numbers, patterns, etc. Musk hired them for doing good, not evil. So here is the nerd version of what Elon Musk is doing in the Marvel comic multiverse.
So, think of Elon as Callisto codename White Knight the leader of the Morlocks. But Callisto also has the power of Caliban who can sense mutants and bring them together. Elon has the power to find spectrum autistic people and to bring together for doing “good”. The folks could easily do “bad” and become very wealthy. Elon gave them a choice, “what if money wasn’t the issue anymore? Are you willing to do good to help people and the USA?” So, turning potential villains into super heroes with unlimited money and power to do good. Of course, I am sure that Elon would rather be Professor X of the X-Men than a stinky sewer dweller like Callisto, but I like the rogue-ish element.
Government is now reduced to a video game 🤣 Oh Elon!
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
Well……,a good wood stove and self siphon water heating system can help at least cut the bills if not get rid of them,tough in many areas but you have a bit of land can be done,a lot of great how to solar siphon heat articles out there.
During the illegal grow- show era, a lot of electric meter tampering went on. Problem: if hydro puts their portable meter on the line and no match…lo! proof a theft is happening! So now cops can enter.
Busted.
This happened on Gabriola Island nearby. Charges were relatively lenient: lots of legal bills. But Hydro comes round and snips their line. ‘But what do we do they wail’ ? Answer: ‘get a generator. That’s what we do’
Year later dust settled, they are hooked back up. Then comes a knock at the door. Guess who? Revenue Canada. Income is income.
Trump is going to cancel LNG permits to get natural gas prices lower.
That would be funny, wouldn’t it? Just like they stopped refilling the SPR when they took over, though Trump had promised during the campaign that he’d refill it asap.
The largest player in my admittedly niche hobby (Extreme Flight – remote control airplanes) just announced at 15% “temporary” (as long as tariffs last) price increase on all their stock. So much for the exporters absorbing tariffs. Evaluating tariffs based on markups on t-shirts is, ah… misguided.
Now in Canada we would have to pay this 15%, then at least 40% exchange, then 25% Canadian tariff (still in place) then 12% tax, so final bill is about double. Yes, we are overtaxed here. Our only solution, either buy from other companies out of China or Europe, no one will pay double for a luxury good.
Announced price increases don’t count. It’s what people ACTUALLY PAY when they buy that matters for inflation. Inflation is figured on prices PAID, not on sticker prices. So if no one buys at these inflated prices, or buys somewhere else at lower prices, then it’s just an imaginary price increase. And then the company will roll it back, all of it or some of it because it wants to stay in business. You’re regurgitating is the same bullshit the ignorant media keep spreading.
A little off topic, but today we did an appraisal in DC of a basement unit of a 3 unit condo. The entrance was below street grade and was hidden from sight. The Realtor got there 5 minutes after we got there. At the entrance was evidence that some hooker did a trick right there in front of the front door. Expensive shoes, tampons, rubbers etc were left there. Can you imagine paying $500,000 for a condo right where prostitutes were carrying out their business. The female realtor who met us and ourselves were laughing our a$ses off.
Hookers in DC???? Nah – those honest politicians don’t partake in such debauchery. 🥸🤓