Russia Restrictions on European Natural Gas Lead to High Prices in U.S.

Effects of the war in Ukraine are reaching American soil. Now, just over six months since Russia invaded the Ukraine, U.S. natural gas prices are rising to new highs. As the fighting ravaged cities in the Ukraine, Russia has employed alternative tactics to advance its mission using resource control. Though Russia has not fully halted natural gas imports into Europe, it has cut supplies to many EU states, while others have enacted embargos against the Russian fuel. In response, the U.S. moved to fill the unmet demand for natural gas in Europe, and ramped up liquefied natural gas (LNG) exports to Europe. Though new supplies of gas have made it to Europe, Russia continues to severely restrict the amount of gas into Europe, mostly through Germany. Now, Russia has announced that there will be “unscheduled maintenance” on the Nord Stream 1 pipeline, a key piece of infrastructure used to transport natural gas from Russia into Germany through the Baltic Sea. The maintenance will take place over three days, and all movement of natural gas through the pipeline will be suspended for those days. The shutdown spurred fears of Russia cutting all exports as an act of retaliation against the EU’s position on the Ukraine invasion. News of the maintenance hit already elevated natural gas futures hard, with prices soaring to roughly $10/MMBtu. For reference, natural gas prices at the Henry Hub in August 2021 were $4.07/MMBtu. Year over year, natural gas prices have risen by over 150 percent. Prices are not the only concern at the moment, as storages in both importing and exporting nations are emptying. European storages were expected to meet targeted levels at the beginning of this month, largely due to US imports, but are now in question given the shutdown of the Nord Stream 1. In the U.S., natural gas storages are starting to dwindle as well. According to Bloomberg, domestic supplies are 10 percent less than expected levels this year. At the same time, the U..S became the world’s largest exporter of LNG. The culmination of all of these realities creates new concerns in the U.S. about natural gas prices in the coming home heating months. With natural gas futures at their highest levels since 2008, low domestic supplies, and no end to the conflict in sight, it is likely that Americans will be spending more on natural gas utilities in the coming months.