Residential Natural Gas Prices: A Consumer’s Guide

There are two main components to any natural gas bill. There is the cost of transmitting and distributing the natuarl gas and the commodity costs. Keep in mind there is also the sales tax which in Texas would be (8.25%)

Transmission and distribution costs - This involves transporting the gas through gas pipelines from the facility it is produced in to the local gas company and finally from the local gas company to a consumer’s house.

Commodity costs - This is the actual cost of the natural gas not including the transportation or anything else. Find gas’ current price here. NYMEX


The wellhead price also known as the commodity price of natural gas has made up more then 50% of the cost of natural gas. The efficiency of delivery and transportation of gas will further increase that percentage as technology continues to advance in that area. We have seen in the past 5 winters where natural gas at the wellhead has comprised the biggest percentage of the cost. The added demand and reliance upon natural gas will see the natural gas price rise as well. If you look at the power plants in Texas and the trend then you should know that the natural gas commodity is in high demand with almost a 91% correlation with the price of electricity in Texas we see the state that will most likely drive the price higher. Residential Natural Gas is not going to go down dramatically in price until more nuclear power plants are built to alleviate the demand off of natural gas. The resulting high natural gas prices can be attributed to several market factors. Weak natural gas production in the face of increased drilling levels, colder weather over consecutive weeks during the heating season, hurricane production disruptions in the Gulf of Mexico, decreased net imports, and record high crude oil prices are the primary factors as to why natural gas prices have reacted as they have. One often missed additional disruption is the Mexico natural gas pipeline sabotage which raised gas prices 15% during the month of September 2007.

Figure 1. Dissection of Natural Gas Prices by Residential Consumers

Heating Season

Mcf = Thousand cubic feet.

Issues That Change Current Natural Gas Prices

There are a number of issues that have prevailed for most of 2007 that have affected the gas price. Depending on the issue, each changes the price upward () or downward () in relation to the pressure on prices. These