War In Ukraine: Its Impact On Energy Prices In New England

Last month this column explained that high electric and natural gas rates will continue into 2023. It was highlighted that producers started the escalation in the latter part of 2021 by keeping supplies flat. The conflict in Ukraine, however, is an ‘X FACTOR’ in capital letters and underlined because a significant reduction of Russian oil and gas in the world have some saying that energy rates can go ‘unlimited’. This means that oil and gas rates have a path to reach unprecedented levels. Crude’s highest WTI price was set in July 2008 at $145 while natural gas Henry Hub is $13.00 set in October of 2005.

There is a long list of sanctions by the private and government sectors that may provoke Russia to shut down the natural gas pipeline into western Europe. The price of gas in Europe affects New England during the winter months because of the pipeline congestion and the dependence on liquefied natural gas to offset the shortage. New England, therefore, competes with Europe and Asia for supply and as a baseline, the landed price of gas into New England last month was $23.00/Dth and $66.00/Dth in Europe. Yes, it was lower but the average price during the winter months in New England is typically $10/Dth.

WHAT TO DO:

1. Fixed third-party electric supply is your hedge against the short-term and/or variable rates offered by utilities. The lowest fixed rates are short-term < 12 months but for $0.015 more there is budget certainty at 32-36 months.

2. We typically recommend enrolling to third-party natural gas in November because of the winter premium versus the summer discount. There is a good probability that summer gas rates from the utility will match winter rates from 2020/2021. It is also anticipated that utility winter gas rates in 2022/2023 will be higher than this year’s winter according to the Energy Information Administration. Our recommendation is to start a third-party agreement this spring rather than later if the accounts are being served by the utility.

It is our hope and we pray that the conflict in Ukraine ends as soon as possible with Ukraine remaining a sovereign nation.

Thank you for your continued support, your friendly Neighborhood Energy.