Energy Market Update

Summer is upon us, and prices in the energy markets have remained subdued, with both natural gas and electricity prices settling back to stable positions. This comes in sharp contrast to a year ago when energy prices were at multiyear peaks and market volatility was through the roof. The effects of last year’s heightened volatility are still being seen in many ways. 

Natural Gas:
According to late May reports, natural gas underground storage levels are ~600 billion cubic feet (BCF) over storage levels at this time a year ago. To put this in perspective, one BCF of natural gas generally provides annual gas heating requirements for 10,000-12,000 households throughout Ohio. This storage surplus has contributed to natural gas sustaining lower commodity prices on the NYMEX (New York Mercantile Exchange) futures market. Moving into the summer, there are several factors that can move the needle in respect to storage levels resulting in price movement. 

• Weather has the biggest impact as:
  • Higher summer temperatures lead to increased air conditioning demand 
  • Higher demand = more natural gas burn = lower storage = possibility of higher pricing 
  • Lower demand = less natural gas burn = higher storage = possibility of lower pricing
  • In 2022, 38% of electricity generation in the US was produced by natural gas
  • Hurricane season is a wild card as it can move the market in either direction adding to the summer volatility
• US LNG exports: 
  • As recently as 2017, the United States was a net importer of natural gas
  • As of late 2021, the United States is the leading LNG exporter worldwide
  • More overseas demand = reduced storage = possibility of higher domestic gas prices

• Domestic & Global Politics
  • Federal, State and local regulations as well as EPA regulations play a role in power pricing
  • Situations like the Ukraine - Russia conflict add volatility to the worldwide energy markets
  • Limited resources in Europe and Asia lead to an increase in US LNG exports 

Electric:
Much like natural gas markets, electric markets have seen extreme volatility in the last year. An ever-changing electricity generation landscape keeps many consumers contemplating what the future holds. As we head into the summer, with increased electricity demand on the horizon, many of the same factors impact the electric market. 

• The US’s 2022-23 heating season accounted for the highest levels ever recorded in natural gas generated power at 619 billion kilowatt hours
• Electric generation will continue to depend on natural gas pricing as this is the cheapest option 
• Renewable Energy will continue to play a role as the US strives to achieve better energy efficiency standards. In most cases renewable energy comes with a premium and will impact end-users’ costs

The lingering effects of the higher energy pricing over the past 18 months are still being felt. As you have likely seen in the news, electric utilities across the state of Ohio have announced significant increases to the SSO (standard service offer) rates starting in June 2023. This increase will impact customers not in third-party supply agreements. Third-party supply options are available to all Ohio consumers in AEP, AES, First Energy, and Duke service areas. Mercantile and large non-mercantile businesses will likely benefit from individual supply contracts. Smaller businesses and residential customers should look into a local government aggregation program for competitive rates. 

​As electric markets continue to evolve, your Chamber Energy Solutions representative will continue to be a resource for you. Please do not hesitate to reach out with any questions or concerns to Emilie Snider [email protected] or 419 491-1017.