Underlying energy market conditions could signal pain for consumers this winter and beyond

Current natural gas market conditions could signal pain for consumers this winter and sustained issues for years to come, according to energy economists interviewed by FOX Business.

The experts said the energy crisis in Europe, in part caused by Russia's invasion of Ukraine, will continue to hurt consumers in the U.S. through the winter as global natural gas and oil supplies are strained. They also noted that the green energy push heralded by the Biden administration and several state governments will further lead to decreased and more unreliable energy supplies, pushing future prices higher.

"The biggest problem is that the shortage in Europe is driving up prices, and prices are set globally," Diana Furchtgott-Roth, the director of the Heritage Foundation's Center for Energy, Climate and Environment, told FOX Business in an interview. "Because natural gas prices are higher globally, we are exporting more, and that's driving up prices here."

"At the same time, we are putting forward a number of policies that discourage our companies from producing," she continued. "Reasonable people might think that if there were a natural gas shortage in Europe, the United States would do as much as it can to increase production here."

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Power lines are pictured in Houston in 2021. (AP Photo/David J. Phillip, File / AP Newsroom)

The National Energy Assistance Directors Association (NEADA) projected last week that the average cost of home heating across all fuels, including gas, heating oil and propane, would spike 17.2% this winter compared to last year. The group further projected home heating costs to be more than 35% higher than they were two years ago.

NEADA Executive Director Mark Wolfe said the higher prices would force millions of lower-income families to choose between paying for food, medicine and rent.

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Driven largely by higher natural gas prices, electricity prices are also expected to be up compared to last year. Overall, consumers are forecasted to spend nearly 8% more for electricity year-over-year in 2022, according to the Energy Information Administration (EIA). 

"Prices are going to be higher, particularly for natural gas in part because of the increased demand for liquefied natural gas from Europe and Asia depending on how the weather plays out this winter," said Benjamin Zycher, an economist and senior fellow at the American Enterprise Institute.

An aerial image of suburban homes in California. (iStock)

In the aftermath of Russia's invasion of Ukraine, the European Union (EU) has attempted to cut itself off from natural gas imports from Russia. Energy producers from Russia were by far the largest natural gas suppliers for Europe in 2021.

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To help fill the gap, the EU struck a deal with the Biden administration in March to send an additional 530 billion cubic feet of liquefied natural gas (LNG) to the EU by the end of the year. The U.S. exported 300 million cubic feet of natural gas in June, the latest month with EIA data, up more than 10% year-over-year.

"That's a real challenge for Europe this winter," "said Jim Hamilton, an economics professor at the University of California at San Diego who specializes in energy markets. "It's potentially quite a big deal for them to try to get by without gas from Russia. Liquefied natural gas is a potential [answer] to that — you can ship that across the ocean."

"But it's something I think we definitely want to be trying to accelerate here given the potential real crunch risk that Europe is facing," Hamilton said.