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Natural gas prices tumble almost 75%
COLUMBUS - The 60 million American homes that rely on natural gas for heat can expect substantially lower bills next winter, thanks to a glut in supply and the weak economy.
Just as distributors start to lock in contracts for the coming winter, natural gas prices have fallen almost 75 percent. Not all of that will show up as savings on heating bills, but it should mean noticeable savings.
New technology this decade has unlocked massive reserves of natural gas in North America, and the sudden jump in supply has collided with a recession, the worst since World War II, that has sapped demand.
The result has been a collapse even more dramatic than the drop in oil prices.
Natural gas futures ended this week at $3.61 per 1,000 cubic feet, down from a July peak of $13.69. That's a decline of 74 percent, compared with a decline of 64 percent in oil prices over the same period.
Households have yet to see those huge drops reflected in their heating bills because the companies that buy and distribute natural gas in bulk are still passing on the premium prices they paid last summer.
But lower rates are almost certainly coming. Distributors already are signing contracts for next winter that lock in today's low rates.
A 75 percent decline in the price of natural gas does not mean the heating bill will decline by that much. On average, the price of gas makes up about two-thirds of the bill with transportation, taxes, and other expenses covering the remaining costs. Americans spent about $60 billion on natural gas for heat this past winter.
Distributors don't profit from the price of gas. They typically make money from getting the gas to your home. If they want to charge more, they need approval of state regulators.
In some places, natural gas bills are already way down. The average bill this month for customers of Columbia Gas of Ohio will be $101.54, the lowest in five years and down 26 percent from a year ago.
The government's Energy Information Association says the volume of gas in storage around the country, a staggering 1.67 trillion cubic feet, is 35 percent more than it was last year.