Understanding natural gas market cycles

The factors that make up natural gas pricing can be complex. But understanding the kinds of things that impact the market can help you make smarter decisions.

Factors that most affect the price of natural gas

During typical market conditions, natural gas prices follow the principle of supply and demand — the more the demand, the higher the cost, which causes more competition around a limited supply. Government regulation can impact natural gas prices if new fees are assessed due to updates to equipment or changes in environmental standards.

Without question, weather is one of the most significant factors to impact the market. It is a huge driver in the amount of energy we use on a day-to-day basis. Not surprisingly, natural disasters can create major impacts to the supply and demand curve and pricing to consumers, too.

By analyzing weather patterns, providers like SCANA Energy can predict usage and ultimately understand potential impacts on the market.

Following the seasons

Natural gas prices tend to follow seasonal trends. Demand tends to decrease during the fall and spring, which are often more temperate. Production in the U.S. tends to meet or exceed the demand all year round. Natural gas can be stored, which means that distribution companies can store it for use during periods of peak demand (like the cold winter).

It’s important to note that the amount of natural gas in reserves can cause prices to jump or fall if the actual amount is different than expectations and historical benchmarks. For example, the polar vortex a few years back created a strain in the market, as extreme winter temperatures challenged supply due to extreme demand and led to soaring prices.

Preparing ahead for natural gas price shifts

While you can’t predict exact shifts in the market, typical cycles can be a great benchmark to start from as you’re planning for natural gas purchases. As a knowledgeable provider with 27 years of experience, we’re committed to keeping our customers educated on the market to help them make more informed decisions for their homes and businesses.

Learn more about the energy market