The price of gas has risen over 70% since 2021.
Gas prices have risen over 70% since 2021, but the reason behind the hike is not as simple as it may seem. The increase in gas prices is due to a variety of factors, including increased demand and supply issues. Many people are surprised to learn that gas prices are not directly tied to oil prices, which have also seen a steep rise in recent years. As such, understanding why gas prices are so high requires taking a look at how they’re determined.
How is the price of gas determined?
The price of gas is dependent on multiple factors that include supply and demand, which can fluctuate significantly depending on external factors. The United States Energy Information Administration (EIA) uses five primary components to determine the price of natural gas: weather conditions; natural gas inventories; natural gas production; domestic consumption; and pipeline exports.
What are some external factors that affect the price of natural gas?
Natural disasters like wildfires can wreak havoc on an area’s supply and demand for natural gas, causing an increase in its cost. This was particularly true for California during 2018 when wildfires caused many residents to flee their homes, resulting in decreased consumption and production.
Another factor affecting the cost of natural gas is weather conditions. Extremely cold or hot temperatures can cause consumers to use more or less energy than normal because they will be turning up their heat or air conditioning units more often.
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