Surging Natural Gas Prices Squeeze the US Industrial Sector
Natural gas prices in the US are rising, boosting costs in other industries as well. Here's how increasing natural gas prices are putting a strain on the US industrial sector.
Natural gas prices in the US have surged recently. From June to July, natural-gas futures increased by 48%, with a 10% jump occurring in just one day. These skyrocketing prices have increased costs in other sectors, such as manufacturing, transportation, steel, cement, and glass. It is predicted that the situation will endure over the coming months, as the US continues to export gas to Europe to help cover the loss of Russian supplies. Unprecedented temperatures across the US are also fueling the fuel crisis.
Should the US Protect Its Supply and Stop Exports?
The ongoing conflict in Ukraine and the resultant sanctions enforced on Russia have had a global impact. One of the most significant ways these sanctions are affecting countries around the globe relates to the sanctions placed on Russian exports of oil and gas. In June, the European Union imposed its sixth package of sanctions on Russia, including a partial embargo on Russian oil.
In 2020, the US took first place as the world’s largest producer of natural gas, with Russia coming in second place. With supplies from Russia being drastically reduced, the US has stepped up to supply more gas to Europe. However, some industry executives believe that the US prioritizes its own needs and focuses on supplying gas to itself rather than exporting it. Gas producers seem to be doing the opposite, by pushing for greater export capacity.
As a result, US consumers have seen significant price hikes, with gas prices increasing by 50% of what they were in 2021, and the situation may worsen before it improves.
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Fears Heatwave Will Hike Gas Prices Further
As of July 2022, 70 million people in the US faced excessive heat warnings or advisories. The heatwave that most impacted the midwestern and southern states set record-breaking temperatures. The heatwave caused an increase in energy use, with many forced to remain indoors and cool off with air conditioners. This has added to the troubling gas situation, with sharp increases in electricity use keeping pressure on gas prices.
While temperatures will eventually come down, the price of gas in the US, according to analysts, is unlikely to do so. However, tax breaks planned by the Biden administration should help consumers afford inflated gas prices in the coming months.
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