This year’s sharp decline in natural gas prices has quietly boosted the U.S. economy and significantly reduced energy costs as prices of other essential goods continue to rise. writes about this Bloomberg.
While natural gas doesn’t get as much attention as oil, the low-profile energy carrier is widely used to heat homes, generate electricity, run factories and make fertilizer. As gas futures prices rose sharply in 2021-2022, the rising price wave affected both consumers and producers. The publication writes that the decline is clearly evident at the moment when the price has fallen to the lowest level in the last four years.
The most notable reduction so far has been the reduction in Americans’ heating gas bills. Their payments fell 9% year-on-year in February, according to the Consumer Price Index. This helped solidify a nearly year-long period of sustained spending declines.
Falling gas prices indicate that energy’s impact on overall living standards in the United States is diminishing. The agency noted that in June 2022, this sector accounted for approximately a quarter of total inflation, and its contribution, as derived from the consumer price index (CPI), has fallen to practically zero.
So far the obvious benefits of lower prices have manifested themselves in the housing and communal services sector, but will soon begin to spread to other sectors of the economy. Companies generally hedge the risk of large fluctuations in natural gas prices. Those who hedge against rising prices will continue to benefit until these contractual obligations expire and business returns to current low levels.
Natural gas is used to produce ammonia and nitrogenous fertilizers and is therefore key to the global agricultural industry. Fertilizer maker CF Industries Holdings said in a February report that it had not been able to take full advantage of lower prices due to hedging, but had already benefited from current low spot rates.
The CEOs of Century Aluminum and construction company Construction Partners also recently noted the positive effects of cheaper gas on energy costs and production costs.
Before that, OPEC encountered There are problems in the implementation of the agreement due to Iraq.
Oil prices before come back reached the highest levels of last year.