The Best Time to Lock In Natural Gas Rates

When you are shopping around for a natural gas provider or plan, you might wonder when is the best time to lock in natural gas rates? This is an important question to ask and will help get you the best plan for your business. Knowing when natural gas prices normally rise and fall will help you get the best possible rates in the long term.

What does “locking in” natural gas rates mean?

The term “lock in” refers to entering into an energy contract where the price of natural gas is fixed for the term of the contract. This ensures that your rate will remain the same from month to month and isn’t affected by the market.

When you lock in natural gas prices, you get a fixed-rate which provides you with a more predictable natural gas bill month to month. Natural gas contracts are typically between 6 months and 2 years, but can go up to 5 years, so knowing when prices are cheapest will help you get the best possible deal for your business.

The best times to get fixed natural gas rates

The natural gas market is normally fairly cyclical and because of this you can use seasonality to know when prices are likely to be lowest. As consumers use more natural gas in high demand seasons, market prices rise. This makes the low-demand months the best time to lock in natural gas rates under normal circumstances.

The best time to lock in rates is during the “shoulder months.” Shoulder months are the months just before and after summer: March-April and September-October. Temperatures are generally the most moderate at the end of spring and early fall, as people are using less natural gas to heat and cool their businesses.

As a note, global events like the war in Ukraine or domestic oil and gas leases not being renewed can cause prices to rise so it’s not always best to simply wait for the shoulder months. Ultimately, you will need to take into account seasonality, global events, and domestic events to determine the best time to get the best rates for your business.

What determines natural gas prices?

There are dozens of factors that affect natural gas prices, but there are a few main factors. Examples of this could be what the current cost of the actual gas itself is, and the cost of transporting natural gas from its production to where it is stored and sent to users. These costs are transferred to the customers. The government also plays a role, as taxes and regulations change, so does pricing. Generally speaking, these are the basic factors that affect natural gas pricing.

What causes natural gas prices to fluctuate?

The most common cause for prices to fluctuate is due to supply and demand. If supply is low, or if natural gas use is high, the cost of natural gas per therm will go up. Inversely, when natural gas use is low, or when supply is high the price will go down.

Natural occurrences that affect energy prices

summer and winter seasons

Various environmental factors affect how much you pay for energy, such as:

The Season: When temperatures rise in the summer, businesses rely heavily on air conditioners to keep cool. Similarly, when it gets cold in the winter, consumers rely on furnaces to stay warm. The increase in demand during these periods causes the price of natural gas to rise and when the weather is more mild, prices fall.

Storms: Hurricanes, tornados, blizzards or severe tropical storms can negatively impact natural gas production or transportation. When this happens you can expect prices to rise, especially if it is during a high use month like December or January.

Natural Gas Reserves: The United States produces the majority of natural gas that it consumes. All natural resources are limited and as supplies dwindle, prices could go up. However, the US itself has about 100 years of supply left assuming no more is found domestically.

Man made causes for fluctuating energy costs

gavel, law, scales

Government Regulations and Taxes: The government often creates laws and standards that influence natural gas prices. This could be increased or decreased taxes, new environmental regulations, or opening/closing natural gas extraction sites.

Natural Gas Production: How much natural gas is produced and the cost to produce it heavily affects prices. An excess in production could cause prices to fall and if the price to produce natural gas rises, prices will also rise.

Consumer Confidence: When the economy is predictable and strong, spending more on natural gas is less risky and makes investors confident. But if the economy is not doing well, there is more risk involved and people will spend less. In both cases the price of natural gas is affected.

Competition Between Other Fuels: As the prices of coal, petroleum and other fuels change, so does the price of natural gas. An example of this would be if the cost of coal or petroleum falls consumers might switch to one of them. This decreases the demand of natural gas and can lower prices.

International Events: There are any number of events that can occur in foreign countries that can cause natural gas prices to change. A decrease in production in Europe could cause increased demand for American natural gas exports, thus increasing demand drastically which could increase prices domestically.

Should you get a fixed-rate for your natural gas now?

Probably. With the current state of the energy market and global affairs, prices are likely to continue to rise. If you lock in your prices now you may be able to protect your business further rate increases.

 

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About Consumer Energy Solutions

CES was founded in 1999 and over the past 22+ years has serviced everything from small mom and pop shops to fortune 500 companies. We represent the largest and most reputable energy suppliers in North America and have an impeccable track record at securing the lowest rates possible.