Slight rise expected in natural gas prices

Average bill in Ohio last year lowest in 10 years

Natural gas prices, which the last two years have been some of the lowest in a decade, will rise only slightly this winter thanks in large part to the ongoing supply of gas-rich shale deposits in the eastern and northern United States.

“It’s a very bright future for consumers on the natural gas side going forward,” said Robert Stitt Black, president of the Waterville Gas Co., which at present, has the lowest natural gas rate of any supplier in Ohio at 39 cents per hundred cubic feet.

Recently, Columbia Gas of Ohio Inc. assembled figures showing that during the 2012-13 winter heating season its customers had an average residential bill of $422.42 — the lowest average in 10 years. A winter season runs from November through March.

A recent study by the U.S. Energy Information Administration showed that, overall, Ohio had the seventh lowest natural gas cost in the nation at 75 cents per hundred cubic feet. The Ohio rate was 18.9 percent lower than the national average, and lower than its surrounding states. Indiana was 10th lowest, Kentucky 15th, Michigan 22nd, and Pennsylvania 33rd.

Katherine Teller, an economist with the energy information administration, said residential gas prices for the coming winter will be slightly higher than this last winter based on current gas prices. Gas providers are buying supplies for the upcoming winter right now, so August prices generally tend to determine prices in the winter.

Last year in August prices were in the range of 29 cents per hundred cubic feet. This month they are approaching 37 cents.

According to the federal data, residential gas prices during this last five-month winter heating season averaged 80 cents in the East North Central region of the country that includes Ohio and Michigan.

For this winter, the energy information administration is predicting the monthly gas price will average 93 cents in the region from November through March.

Whether that is higher or lower will depend on the severity of the winter. Two years ago Ohio had a mild winter. Last year’s winter was considered average, Mr. Stitt Black said.

Ms. Teller said another factor in price will be natural gas supplies. Supplies are abundant, though not as abundant as a year ago when natural gas from shale was at its peak, utilities were still burning a lot of coal, and the economy was not as strong.

Last year on Aug. 10 there was 3.26 trillion cubic feet of gas in storage, a record amount for the second week of August. This year there is a little over 3.01 trillion cubic feet of gas in storage as of Aug. 9, the federal agency said.

Considering that the five-year average is 2.96 trillion cubic feet, this year’s supply is abundant, but just not as abundant as last year, Ms. Teller said. “It’s still very plentiful. We won’t have any kind of shortage,” she added.

But those 2012 record supplies drove prices down to below 20 cents per hundred cubic feet on the wholesale market, a figure that hadn’t been seen in more than a decade, simply because there was just too much gas and not enough storage underground to keep it.

A lot of that gas went straight to utilities who could burn it to generate electricity at a cost well below that of coal. “This year there’s not quite that kind of surplus,” Ms. Teller said. As a result, “it’s driving the price slightly higher.”

Eight years ago, gas prices skyrocketed after Hurricane Katrina ravaged natural gas production wells and equipment along the Gulf Coast.

But now, Mr. Stitt Black said, “hurricanes are much less significant in driving prices because very little supply comes from the Gulf anymore. It's mostly all from land-based wells from shale,” he said, referring to the Marcellus shale fields in part of Pennsylvania, Ohio, West Virginia, and New York, and the Bakken shale region in North Dakota.

“Given all the shale development, I see stable prices going forward,” Mr. Stitt Black added.

And there’s more good news for consumers in the future, he said. There is a lot of gas from shale available in Appalachia but it is trapped because there are no gas lines that can move it into the pipeline network.

“They are still building gas lines but until that infrastructure gets built it is just sitting in the Appalachian basin,” Mr. Stitt Black said. “There’s a lot of pent-up supply waiting for the infrastructure to bring it to market.”

Contact Jon Chavez at: jchavez@theblade.com or 419-724-6128.