Understanding the price of natural gas

Dec 12, 2019 by Énergir in Energy
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Natural gas has been the least expensive energy source in Québec for many years. Yet, as with electricity and fuel oil, its price can vary at certain times of the year. Do you ever wonder why? After all, it’s the same product all year long! This is true, but there are several factors that influence its price and therefore your bill. Here’s an explanation…

Market rules

For starters, you should know that Énergir doesn’t make any profit on the price of natural gas itself (also referred to as the “commodity”), nor on its transportation. It only makes a profit on its distribution, meaning the use of its network to get the natural gas to its customers. Basically, the company charges its customers the same price for natural gas as what it pays. But because this price is subject to market forces, it fluctuates based on supply and demand. This is why the price can sometimes vary during the year.

Influence of the weather

Because Énergir procures most of its gas supply via the Dawn hub in Ontario (one of North America’s largest natural gas trading centres), the gas price is specifically influenced by the needs of consumers in the Midwest and northeastern United States. Who are these major consumers? Densely populated and heavily industrialized areas such as Boston, New York and Chicago. Consumers in these regions purchase huge amounts of natural gas, notably to produce goods and services but also to generate the electricity needed for heating and air conditioning. So it’s the consumption—and definitely the weather—in these areas that most impact the resource’s price: the colder it is, the more people are heating, and the higher the price of natural gas becomes in Québec.

Natural gas is gaining ground worldwide

You should also know that demand for natural gas could increase considerably in the coming years. The International Energy Agency is forecasting an increase of up to 43% compared to 2017 levels. Fortunately, the forecasted increase in natural gas consumption has little impact on pricing, given the sustained growth of natural gas production in the U.S. and around the globe.

How Énergir manages fluctuations

To offer the best possible price and counteract the effect of natural gas price fluctuations on your bill, Énergir uses a variety of supply sources. This means dealing with a number of suppliers in different regions of North America, and determining the quantity and opportune timing for purchasing natural gas for delivery to its customers.

A reassuring outlook

Finally, keep in mind that the price of natural gas has been relatively low for several years, and should remain so for the next decade due to North America’s abundant reserves and large-scale production. This is good news for consumers!