Natural gas prices

Prices for heating fuels such as natural gas are increasing heading into the winter months.

‘Alberta producers operating livestock barns, greenhouses and large heated shops will no doubt see their heating costs dramatically increase over the next 6 months,’ says Ryan Furtas, market analyst with Alberta Agriculture and Forestry. ‘To what extent the Alberta natural gas price increases is yet to be determined, but at least the prices are at a low spot to begin with and, for the past 5 years, producers have enjoyed low natural gas prices.’

Natural gas prices have risen due to lower supplies and rising demand. In North America, there was strong demand in the summer, which resulted in less gas being put into storage for winter months. Prices are now poised to push higher, especially if a colder than normal winter occurs.

The upward pressure on the gas prices is global and North American markets are influenced by prices in other markets since gas can be exported. Prices for gas in Europe and Asia are nearly 4 times that of the port-ready North American values.

‘Here in Alberta prices have risen, but so far the increases could be described as minimal, especially since 2020, and the past 5 years has had relatively low gas prices. The Alberta price in September 2021 for natural gas increased to $3.87/GJ (Gigajoule), the highest price it’s been for the past 5 years.’

Figure 1. 5 year Alberta farm price for natural gas $/GJ

Source: Alberta farm input survey

Since the fall of 2016, Alberta’s price of natural gas has spent approximately 85% of the time under $3.00/GJ, and 75% of the time priced less than $2.50/GJ. The most recent 5-year average price comes in at $2.42/GJ, which means the recent increase to $3.87/GJ amounts to a 60% price increase.

‘However, looking at the past 20 years of Alberta natural gas prices, it quickly becomes evident that the past 5 years have indeed been low cost. From 2001 to 2011, natural gas averaged $5.92/GJ, whereas prices from 2011 to 2021 average just $2.78/GJ.’

Figure 2. 20 year Alberta farm price for natural gas $/GJ

Source: Alberta farm input survey 

‘The last time prices for natural gas were this high was in 2014, when the price spent most of the year above $4/GJ. Analysts talk about prices going to 2008 levels. If so, that would come as quite a shock, considering prices were above $6/GJ going into the 2008 commodity super cycle when prices topped out at over $10/GJ,’ explains Furtas.