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The impact of the global natural gas shortage on the U.S.

JUANA SUMMERS, HOST:

If using the AC felt expensive this summer, well, heating up your home this winter may be even worse. Natural gas prices are soaring in the U.S., and they are expected to keep climbing.

For more, we're joined by NPR's Arezou Rezvani, who covers the energy markets. Hey there.

AREZOU REZVANI, BYLINE: Hi, Juana.

SUMMERS: So help us understand. Why are these natural gas prices so high?

REZVANI: Well, there's much less of it in the world these days, and that's because of Russia. For years, Russia supplied natural gas to Europe, but it has slashed supplies in recent months. And so there's a lot less of it on the market while global demand has remained high. I mean, here in the U.S., 40% of the nation's power comes from natural gas. Half of homes use it for heating. It was also a really hot summer for parts of the country. People had their ACs working overtime. Mix in the fact that U.S. natural gas inventories have dropped this year, and all of this together is driving prices way up. And I'm talking up about 300% from just a few years ago.

SUMMERS: Wow. OK. So this high level of demand - we're not that far from winter - is that going to continue?

REZVANI: That is the expectation. And we're likely to feel the squeeze here because liquefied natural gas producers in the U.S. are exporting more of their supplies to Europe. I talked to Ellen Wald of the Atlanta Council about this. She says U.S. producers have an incentive to export.

ELLEN WALD: If the price they can get in Europe is a lot more than what they can sell their natural gas for in the U.S., then that - some of that natural gas is going to be exported to Europe, and that is going to raise the price of things in the United States. Not to the levels that we're seeing in Europe - but yeah, we could continue to see more expensive energy costs in the U.S. because of this.

REZVANI: So there's clearly a profit opportunity for U.S. producers right now. But there is also a geopolitical argument for stepping up exports to Europe. The EU is a huge trading partner, and major economic disruptions there could have aftershocks here in the U.S.

SUMMERS: OK. So what does all of this mean for people's energy bills? How much could they be going up?

REZVANI: Yeah, it could go up by a lot. There are estimates that the average family may pay more than $1,200 to heat their home this winter. That's $175 more than last year, which is notable when you consider that nearly 40% of Americans feel financially strapped, according to a new NPR/Marist poll out today. For homes in the U.S. that do use natural gas, they could see their electricity costs go up by a third, which could keep inflation up. Texas is the biggest natural gas-consuming state. That is where most people could see the biggest jumps in their bills. But I should mention, the U.S. could be spared the worst of this price spike if it is a mild winter.

SUMMERS: OK. That's a big if. Arezou, how long could all of this last?

REZVANI: You know, much of that depends on whether Russia turns the gas taps back on for Europe this winter. Another big factor is how quickly Europe can find new gas sources. Agathe Demarais, of the Economist Intelligence Unit, says it will be hard to do but worth it long term.

AGATHE DEMARAIS: Europe will be in a better place because it will have completely gotten rid of its dependency on Russian gas. So we expect the most pain to be concentrated in late 2022, early 2023 in many European countries. But after a few years, Russia won't be able to weaponize gas supplies any more.

REZVANI: So bottom line - these high prices may stay a while.

SUMMERS: That's NPR's Arezou Rezvani. Thank you so much.

REZVANI: You're welcome. Transcript provided by NPR, Copyright NPR.

Arezou Rezvani is a senior editor for NPR's Morning Edition and founding editor of Up First, NPR's daily news podcast.