Natural gas prices to jump this winter

Millions of Canadians who heat their homes with natural gas will be faced with a severe price increase this winter.
Though steadily rising gasoline prices have been the main focus in the news lately, the next few months will see jumps in natural gas bills that will make the gas pump hikes look like small change.
It’s expected prices will rise close to $400 a year for the average customer of Union Gas in Ontario. In fact, the company recently wrote to all of its more than one million customers to let them know about the price increase.
“As of Oct. 1, there will be an overall increase of about 15 percent,” said Rene Bourgeault, district manager of Union Gas in Thunder Bay. “It is not the kind of news we like to tell our customers but it is a commodity that is dictated by the energy market.”
While there is no immediate sign of lower natural gas prices on the horizon, Bourgeault is hopeful future pipeline construction will help bring them down again.
“Currently there are some pipeline projects in the works,” he explained. “There is hope that those pipelines will help the supply and demand of natural gas, and will then, in effect, lower the prices.”
Natural gas prices in Canada have been deregulated since 1985, pushing Canada into a continent-wide natural gas market.
“The market determines the price,” Bourgeault stressed. “The bottom line is supply and demand. The greater the demand for the commodity, the higher the prices go.
“In the United States, especially, there has been a lot of fuel switching going on,” he continued. “Because of an increased environmental conscientiousness, natural gas has been displacing other energy sources.
“The supply can’t keep up.”
In addition, the relative cheap cost of natural gas heating compared to other sources also has spawned an increase in demand, ironically sending prices through the roof.
“Unfortunately, we [Union Gas] do not have any control over the price of natural gas,” Bourgeault remarked. “The price you pay reflects the price we are paying.”
Those Canadians who decided to sign long-term supply agreements from independent natural gas suppliers last year will be happy they did this winter.
They will be paying the locked-in fixed prices that were considered high at the time but now are a bargain compared to the price now.
“The good news, however, is that the natural gas prices are cyclical,” said Bourgeault. “If we have a warm winter, then our prices will go down with the increased supply.”