What Factors Affect the Natural Gas Market

As a business owner or facility manager, you probably keep an eye on market trends for various industry-specific costs. But are you aware of what the natural gas market looks like this year or what impacts the fluctuation in that market? Below, you will learn more about natural gas production. Let’s take a deep dive into the factors affecting the natural gas market, from weather to economic conditions and more.

5 Factors Affecting the Natural Gas Market

Natural gas is an energy resource that powers heating systems, clothes dryers, and even vehicles.Some companies use natural gas as their primary source of electricity. Every business is looking for ways to get the most from its energy usage. That means knowing what market trends look like and how they impact business. For those looking into what affects the natural gas market, here are five of the primary factors:

1. Economy

During economic growth and prosperity, people are less frugal and therefore less conservative with energy consumption. When there’s a recession or an economic downturn, people (and companies) scale back energy usage; causing demand to go down. When demand is down, prices go up. This is most prevalent in the industrial sector. The housing market, unemployment, and the stock market all affect natural gas demand, and therefore the price.

2. Seasons and Weather

When the weather fluctuates or the seasons change, natural gas usage also fluctuates. For example, in the coldest winter month, you may need to increase the temperature inside your company offices or retail shops. Likewise, in the summer heat, you’ll run your A/C to make the temperature inside more comfortable for your customers and staff. These conditions impact natural gas demand. Another example of how weather affects natural gas is extreme, catastrophic weather events like Hurricane Katrina. Not only did businesses increase the demand for natural gas, but Louisiana is the pathway to the resources that supply natural gas to the U.S. This caused demand to increase; however, supplies were down, and the natural gas market took a huge hit.

3. Storage Costs

Natural gas storage facilities make it possible for energy companies to supply it year-round. The associated costs of storing natural gas and the amount in storage impact prices and, therefore, demand. The Energy Information Agency (EIA) publishes weekly reports saying how much natural gas the government has in storage facilities.

4. Alternative Energy Cost Shifts

Since petroleum is an alternative to natural gas, when petroleum prices drop, natural gas demand lowers due to the shift to petroleum as the energy source. Coal also affects natural gas demands. Predictions imply that the adoption of renewable energy resources will have an impact too.

5. Supply and Demand

Prices for natural gas depend on the market supply. When demands are high, production ramps up, and supply increases. This drives down the price. When supplies are low, prices increase. Although, if demand increases and supplies are low, like in the case of Hurricane Katrina, prices increase because production is down. All of which impact the natural gas market.

If You’re Concerned About the Natural Gas Market Outlook, CGE Renewables Can Help

At CGE Renewables, we know you have concerns about natural gas prices and how the market may impact your monthly bill. When operational costs are high, it’s a struggle to remain competitive in the market in your industry. For more information on how we can help you save on your natural gas bill, contact us today!