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Why Inflation Caused Natural Gas Prices to Surge?

Natural Gas Prices - Slattery Energy - New York City, NY

Inflation is still high in the United States and the rest of the world, with fears about rising inflationary pressures in the near future. The price of natural gas, like other commodities, is determined by the market where it is traded.

This implies that gas prices are determined by supply and demand at a specific delivery area rather than labor, material costs, and other variable expenses connected with generating that gas. As a result, while salaries and other production variables in the gas industry may be growing in lockstep with inflation, they are not boosting natural gas prices.

Reasons behind High Gas Prices

Prices of natural gas are rising in New York City due to a combination of variables, including long-term high demand, reduced storage, supply chain concerns, pandemic impacts, and the strong demand for exports driving prices higher. Heat-load demand is one of the most vital pricing factors in the winter. The cooling need determines electricity generation in the summer, a major driver of demand during the season. During these difficult times, it can get hard to improve efficiency while cutting energy costs. This is why it is important to hire experienced NYC gas consulting companies like Slattery Energy.

Rising Demand of Natural Gas

The total price of all items generated from a commodity will rise when demand rises—and it's crucial to remember that natural gas and its derivatives are utilized as ingredients in a wide range of paints, glues, plastics, chemicals, and other products. As a result, commodities such as natural gas are commonly seen as a leading indicator of inflation and larger energy bills.

The underlying economic reasoning is that commodities react faster to economic shocks like increased demand. They also reflect the ups and downs in their pricing long before a customer notices a shift in price, such as a storm wiping out Gulf Coast supply because consumers often interact with items downstream of natural gas.

The Price of Inflation

This is also why financial counselors advocate commodities as an inflation hedge in portfolios—commodities will grow as they contribute to inflation, but other financial instruments, such as shares, would be influenced more slowly and in unknown ways.

Overall inflation increased by 0.9 percent in February and is now at 8% for the year, which is in line with national norms but shows no signs of slowing. In comparison to February 2021, natural gas price inflation adds roughly $15 per $100 for a typical household bill for piped natural gas service.

Natural Gas Consultant NYC

If all this seems too complicated for you, you can always reach out to Jim Slattery, a trusted energy consultant in New York City. You can always count on Slattery Energy to increase savings in energy costs.