Why Is Commercial Gas Pricing So High

Many businesses are once again feeling the pressure of surging gas prices caused by a clash between rising demands and supply shortages. Reports from the U.S. Energy Information Administration saw commercial gas prices in the U.S. hitting their highest average since 2014. The reason for the price spike is simple textbook supply and demand with the addition of impacting weather that hit certain states in the U.S. in 2021. Many Americans have also gotten back to driving in the summer of 2021. The combination of that and domestic supply interruptions have influenced commercial gas prices today. Wondering why the pricing of commercial gas has been so high? Let’s discuss the factors affecting commercial gas pricing, the reasons behind the recent fluctuations, and what this means for your commercial business.

What Affects Commercial Gas Prices?

In general economics, increases in supply will result in lower prices, while decreases in supply will lead to higher prices. This also means that higher demand will lead to higher prices. While specific U.S. energy market trends will play a role, a few main factors remain top of mind regarding business energy prices.

Economic Growth and Supply

A strong economy that demonstrates growth in the commercial and industrial markets will impact various markets, especially the oil and gas sector. Businesses thriving in a growing economy will experience an increased demand for their goods and services, raising the demand level for oil and gas. However, a supply shortage caused by other factors will raise the price of oil and gas, which causes a ripple effect in other areas of the economy.

Fluctuating Crude Oil Prices

Crude oil prices can influence the price of natural gas the way coal and other heating oils do not. When crude oil prices rise, so will the cost of products manufacturers and refineries produced from it. This includes gasoline. As a result, businesses that use petroleum products may consider cutting back on gasoline to control costs.

Weather

Seasonal weather like snow, hurricanes, and storms can influence commercial gas prices. Some weather conditions will force refineries and manufacturing plants to shut down or slow production when there is a threat to the safety of employees and facilities.

What Caused Recent Fluctuations?

The COVID-19 pandemic radically influenced the price of commercial gas. At the beginning of the pandemic, lockdowns and social distancing led to canceled travel and commutes, which drastically decreased the need for gas in both commercial and consumer uses. By the summer of 2021, most were back on the road, and consumers’ spending habits began returning to normal. There was a gradual increase in the price of gas in the first half of 2021, but this was short-lived when Hurricane Ida shut down a large number of the United States’ oil drilling and refining capacity in the Gulf of Mexico last August. This meant there was an increasing need for natural gas, but supply remained low for the rest of 2021 despite refineries getting back inline towards the end of the year.

How Does This Affect Your Commercial Business?

Surging commercial gas prices will increase business costs, narrowing the profit margins of businesses across every sector. This may also push energy-intensive companies to reduce production, disrupting the supply chain in several sectors including food, transportation, and other commercial products. It’s likely your business will have to absorb some of the added cost or compensate them by raising prices. If your business is focused on delivery and transportation, you need to reevaluate your geographical regions or find other ways to optimize cost. Interested in getting the best market business energy prices for your commercial business? Get in touch with us today and let us answer all your questions.