Natural gas costs are rising around the world. As a result, global markets are at their highest levels in years and are sustaining these highs for much longer than average.
Mid-April, European gas prices at the Dutch Title Transfer Facility (TTF) have risen to $39 CAD/GJ. An increase of 427% relative to the same time last year. At Henry Hub in the U.S., gas has gone up 161% to $8 CAD/GJ over the same period. Canadian prices at AECO have increased by 150% to $6.70 CAD/GJ.
Market volatility is being driven by uncertainty. Gas storage levels, colder-than-expected weather conditions, and Russia’s invasion of Ukraine are all factors.
During this past winter, U. S. consumption rose by 3% relative to the prior year. Import bans on Russian natural gas have limited supplies to an already undersupplied European market. Additional American exports of Liquid Natural Gas (LNG) to Europe have partially contributed to upward pressure on U. S. prices.
The trend is clear. Analysts suggest that the days of $2/GJ gas are over and that prices may not drop below $4/GJ for at least the next two years.
Price increases aren’t limited to just the market portion of the gas bill. In Canada, carbon costs are also increasing. As of April 1, 2022, the federal government’s price on carbon rose $10/TCO2 and now stands at $50/TCO2. With this recent increase, Canada’s carbon price translates into approximately $2.50/GJ. The federal government has pegged the carbon price to rise annually until 2030, reaching $170/ TCO2. For gas consumers, that represents $8.50/GJ.
Note that greenhouses currently receive an 80% rebate on their carbon costs. However, the effective increase is sizable even with the rebate – to $1.70/GJ over the next eight years. See our article on Carbon Tax for more details. Greenhouse growers looking to expand, or evaluate their natural gas consumption, need to use proactive forecasts rather than historical data. “All-in” costs for gas consumers could be as much as $10-12 CAD/GJ this year, compared to $7-8/GJ in 2021. Forward contracts for the next five years continue to show a hefty premium of 75% to 150% over recent market lows. Higher costs look likely to stay.
By 2030, natural gas could average over $16/GJ, assuming current market levels and a steadily increasing carbon tax.
Does the prospect of increasing natural gas costs seem intimidating?
Now is the time to reach out to 360 Energy. We show organizations and greenhouses how to control costs using proactive procurement, minimizing carbon emissions, reducing carbon tax exposure, and investigating natural gas fuel alternatives.
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