By Scott DiSavino

(Reuters) – Regional markets in the United States are experiencing record-setting prices for winter – which suggests that energy costs in Europe and Asia, which have been causing problems in Europe and Asia recently will soon hit the top-producing country in gas production.

The European and Asian gas prices have tripled in the past year. This has caused manufacturers in Europe to reduce activity and triggered power crisis in China.

Because the United States is still limited in its export capabilities, it has ample gas supplies. This has helped protect them from global crisis.

The U.S. benchmark natural gas contract has seen a rally, reaching seven-year records, however, its price at $5.62 per,000,000 British thermal units (mmBtu), is far less than the $30+ being paid in Europe or Asia.

But, Americans are worried about the coming Cold, in particular New England and California. These areas have high gas prices, which will make it difficult for them to get their fuel this winter. New England buyers expect gas to be more expensive than $20 per millimeter.

California and New England have high winter costs. The limited pipeline capacity into these regions is often constrained by the freezing temperatures. However, this winter could prove to be more severe.

These two regions spent many years attempting to move away from fossil fuels. They did this through regulation, retirement of power plants and carbon pricing. This makes fossil-fired power, especially coal, more costly.

U.S. gasoline currently being delivered at the Henry Hub terminal located in Louisiana has surpassed $6, marking the nation’s benchmark. This is the highest level since 2014. This price range is the same for January, suggesting that buyers are confident the nation will have sufficient pipeline and storage access this winter to ensure fuel flows smoothly.

“Henry Hub prices continue to climb for the winter months, but we should see even bigger increases on the East and West Coasts for New England and California,” said Matt Smith, lead oil analyst for the Americas at commodity analytics firm Kpler.

Gas for January delivery in New England is on the rise. This week, it traded at $22 at Algonquin Hub, the largest price ever paid since February 2014 and January 2015.

It is a reflection of the fact that the region which converts to liquefied petroleum gas (LNG), when its pipelines get congested will now have to compete against buyers from Europe and Asia who already pay a lot more to fuel the super-cooled.

New England will see 49% electricity coming from gas-fired power plants. While this is similar to the past five years, the overall demand has risen as the economy is recovering.

“What’s driving gas prices is anticipated increased demand for gas pipeline as the economy recovers and supply is catching-up after pandemic lowdemand,” Caroline Pretyman (NYSE: Eversource Energy), a spokesperson for Eversource Energy, New England’s largest energy supplier.

CALIFORNIA DREAMIN’ – A WINTER’S DAY

For January 2022 prices in Southern California were over $13. This would surpass February 2021’s record-breaking price of $21 per gallon.

California is experiencing an extended drought, which has limited its ability to create electricity by hydropower. This has led to prices rising in California. Analysts also said that solar has been limited by wildfire smoke.

The state relies more on natural gas-fired plants as they are predicted to generate about 45% of the electricity this winter. That’s higher than the average 5 year of 41% due to drought-related hydropower shortages.

Federal projections show that only 4% will be produced by California hydroelectric plants this year. That’s a drop from 14% on average over the previous five years.

California, unlike New England has gas access from other regions, including Texas’ Permian Shale, New Mexico’s Rocky Mountains, Canada, and New Mexico.

New England is estimated to import approximately 16 billion cubic yards (bcf), of LNG in winter. This amounts roughly to 5% or its winter gas consumption. However, these shipments are likely to be expensive due to the competition from Europe or Asia.

There is another alternative for power generators: switching to oil burning. Currently, oil is three times more expensive than natural gas. This will increase as prices for gas rise. Petroleum also releases 30% more carbon dioxide than natural gas, and other pollutants.

Analysts believe that New England will start to burn oil this year sooner than expected. Notably, oil output spiked 27% in December 2017 due to extreme cold, as compared to just 1% earlier in the month. This is according to ISO New England.

Here’s a graphic about Winter of Natural Gas Unsatisfaction

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