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Why do natural gas prices go up and down?

Updated

General information, not a substitute for the advice of an attorney.

Short answer: Because short-term substitutes for natural gas are limited, so even modest shifts in supply or demand can move the price a lot (EIA FAQ 43). The benchmark Henry Hub spot price averaged $2.95 per million Btu in September 2026, after reaching $7.72 in January 2026 and as little as $1.49 in March 2024 (EIA Henry Hub monthly).

The supply side

EIA lists three supply factors: natural gas production, imports, and storage inventory levels, including sales out of storage when prices rise (EIA FAQ 43). Higher supply tends to push prices down and lower supply pushes them up (EIA FAQ 43). Supply is not the constraint on a multi-decade view: EIA estimates about 2,973 trillion cubic feet of technically recoverable dry gas as of January 1, 2021, plus about 445 Tcf of proved reserves, enough for about 86 years at the 2021 production rate of about 34.52 Tcf (EIA FAQ 58).

The demand side

  • Consumption infrastructure: gas-burning equipment in buildings, gas-fired power plants, and LNG export facilities (EIA FAQ 43).
  • Weather: cold raises heating demand, and heat raises cooling demand through power plants (EIA FAQ 43).
  • Economic conditions, which affect manufacturers in particular (EIA FAQ 43).
  • Petroleum prices: higher fuel oil prices can make gas less of a bargain and moderate demand from generators and large building owners (EIA FAQ 43).
  • International demand (EIA FAQ 43).

What the recent record looks like

Henry Hub monthly averages, dollars per million Btu (EIA): August 2022 peak $8.81; March 2024 low $1.49; 2025 ran from $4.13 in January down to $2.91 in August and back to $4.26 in December; 2026 opened at $7.72 in January, fell to $3.62 in February and $2.77 in April, and stood at $2.95 in September. The January spikes in both years fit EIA's weather factor: cold weather raises heating demand on a system with limited short-run substitutes (EIA FAQ 43). The table was released October 21, 2026 (EIA).

Why it reaches your electric bill

Natural gas generated 43.1% of U.S. utility-scale electricity in 2023 (EIA FAQ 427), and EIA names fuel costs first among the factors that set retail electricity prices (EIA, prices and factors). A gas spike therefore shows up in power prices with a lag that depends on how your utility or retail provider buys fuel.

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General information from the sources linked above, not legal, tax, or financial advice.

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