Average cost of wholesale U.S. natural gas in 2022 highest since 2008

In 2022, the wholesale U.S. natural gas spot price at the national benchmark Henry Hub in Louisiana averaged $6.45 per million British thermal units (MMBtu), the highest annual average—in both real and nominal terms—since 2008, based on data from Refinitiv Eikon. The 2022 average Henry Hub real natural gas spot price increased over 53% from 2021, the fourth-largest year-over-year increase in natural gas prices on record, behind only 2000, 2003, and 2021. On a daily basis, the Henry Hub spot natural gas price ranged from $3.46/MMBtu to $9.85/MMBtu, reflecting significant day-to-day price changes.

During the first quarter of 2022, declining U.S. natural gas production due to production freeze-offs in January and February and high net withdrawals of natural gas from storage caused the natural gas price to increase. Continued high demand for U.S. liquefied natural gas (LNG) exports in Europe and rising, weather-driven demand for natural gas in the United States led to relatively wide Henry Hub price ranges in February and March, between $4.03/MMBtu and $6.70/MMBtu. Despite these price fluctuations, the $4.67/MMBtu average spot price was lower in the first quarter of 2022 than during the rest of the year.

In May, weather-related demand for natural gas for electricity generation and increased uncertainty around working natural gas storage injections led to an increase in natural gas prices. The Henry Hub natural gas spot price increased above $9.00/MMBtu in early June, but it then fell by 40% by July 4 because of a fire and the subsequent shutdown of the Freeport LNG export terminal. The shutdown reduced U.S. LNG exports by about 2 billion cubic feet per day (Bcf/d), and more natural gas was diverted to underground storage.

The Henry Hub natural gas spot price began to rise again in July and peaked on August 22, 2022, at $9.85/MMBtu, 60% higher than the daily Henry Hub natural gas spot price at the beginning of the year.

The natural gas spot price decreased late in the third quarter because of high natural gas production and the resulting above-average storage injections in September. By November, working natural gas in underground storage was close to the previous five-year average. The Henry Hub natural gas spot price reached an annual low of $3.46/MMBtu on November 9, down 65% from August 22. The natural gas price began to increase again in December because of dropping winter temperatures that increased demand for natural gas for heating.

Capacity constraints also affected natural gas prices throughout the year on a regional level; for example:

• Prices at key Appalachian trading hubs continued to remain at a $0.68/MMBtu average discount to Henry Hub according to pricing data from Natural Gas Intelligence due to limited pipeline takeaway capacity in the region.

• The spot price at the Waha Hub in West Texas averaged $1.26/MMBtu below the Henry Hub in 2022, largely due to limited pipeline takeaway capacity in the region and to periods of pipeline maintenance that decreased takeaway capacity.

• Several pricing hubs in the western United States averaged over $48/MMBtu above Henry Hub on December 21 due to colder-than-normal temperatures and regional pipeline constraints.