Patrick T. Fallon/AFP via Getty Images
If air-conditioning in your home felt expensive this summer, get ready, because turning up the heat could cost even more this winter.
The rising electricity bills are driven by the increase in the price of natural gas, which generates about 40% of America’s electricity.
The US Energy Information Administration expects this increase to last through the winter, given that Russia’s invasion of Ukraine has reduced overall supply while global consumption remains high.
Here’s what’s behind the price increase and how it could affect you.
Russia is weaponizing its natural gas supplies
There is much less natural gas in the world these days because of Russia.
For years, Russia supplied Europe with cheap natural gas to power its factories and heat its homes. But after the West imposed sanctions for the war in Ukraine, Russia cut off its supplies, effectively weaponizing its natural gas.
While global supply has fallen, demand has remained high.
In the US, half of homes use natural gas for heating or cooling.
Given how hot this summer was for parts of the United States, many had their air conditioners on overtime.
U.S. natural gas inventories have also fallen this year, collectively driving prices up about 300% from just a few years ago.
What will this mean for prices in the US?
Prices are expected to continue to rise.
Although the country’s liquefied natural gas reserves are low, this has not stopped the US from exporting large quantities to Europe to fill the void left by Russia.
American natural gas producers have an incentive to export since they stand to profit from the increase in global prices.
“If the price they can get in Europe is much more than what they can sell their natural gas for in the US, then some of that will be exported to Europe, and that will increase the price of things in the US,” says Ellen Wald, an oil and gas expert at the Atlantic Council.
“Not to the levels we’re seeing in Europe, but we may continue to see more expensive energy costs in the US because of this,” she adds.
There is also a geopolitical argument for increasing supply to Europe. The European Union is a huge trading partner, and major economic disruptions there could send aftershocks to the United States.
How much will the electricity bill go up?
Bills can add up a lot, especially in a state like Texas, which is the largest natural gas consuming state, followed by California.
The National Energy Assistance Directors Association (NEADA) estimates that the average family could pay more than $1,200 to heat their home this winter. That’s $175 more than last winter, which is remarkable considering that nearly 40% of families already feel financially strapped, according to a new NPR/PBS NewsHour/Marist vote.
The 40% of American homes that use natural gas could see their winter heating costs rise by a third, according to NEADA, which could keep inflation up.
But much of this also depends on the winter weather. The US could be spared a massive peak if it has a mild winter.
Kirill Kudryavtsev/AFP via Getty Images
How long could this last?
Much depends on whether Russia will turn off the gas taps for Europe before winter. Kremlin spokesman Dmitry Peskov said this month that Russia would resume gas flows only if the West lifted sanctions.
The other major factor is how quickly Europe can find alternative sources of natural gas.
Right now, Europe gets most of its gas through pipelines, but it is racing to set up additional infrastructure to receive liquefied natural gas, which can be transported by sea from countries like Qatar.
It will take time, but in the long term it will free Europe from dependence on Russia for a key commodity.
“Europe will be in a better place because it will have completely got rid of its dependence on Russian gas,” says Agathe Demarais, global forecasting director at the Economist Intelligence Unit. “After a few years, Russia will not be able to weaponize gas supplies anymore.”
Until then, as the US continues to export its supplies to Europe and demand is high, this price hike could be here for a while.