If you’re like most Americans, you’re probably worried about gas prices.
In fact, a Gallup poll earlier this summer revealed that increasing gas prices are causing financial hardship for 67% of Americans.
Average energy prices have increased by 33% over the last year here in the U.S. That’s according to the July CPI figures released earlier this month.
And sure, we’ve seen some relief at the gas pumps in recent months. The national average price of gas has dropped from $5.01 in mid-June to $3.84 today.
Even in my home state of California, where gas prices are higher than in nearly every other state in the country, I can fuel up my car for about a buck cheaper per gallon now than in mid-June.
Yet, I believe this is only the calm before another storm in energy prices.
Winter is just around the corner… and that means higher demand for energy. And when demand increases, prices typically follow.
Some sectors will suffer the effects of higher fuel prices more than others.
That’s why tomorrow night at 8 p.m. ET, I’m holding a special summit about the coming energy crisis… and what you can do to prepare your portfolio…
I’ll also outline five sectors that will go down as we head into winter. So be sure to sign up here to reserve your spot.
But the good news is that there are also sectors that will benefit as fuel prices soar.
And today, in the first of a two-part series, I’ll show you how to take advantage of one such sector.
But first, let’s take a look at one part of the energy market that hasn’t seen any relief yet this summer – your electric bill.
Oppressive Utility Costs
We’re seeing higher prices across the board as a result of increasing fuel costs.
That’s because we use fuel for everything from getting people and goods from point A to point B, to cooling or heating our homes, to keeping the lights on.
And for some households, rising energy prices are having disastrous consequences.
For instance, household electricity charges are up 15.2% over the last year. As a result, 1 out of every 6 American homes is now behind in its utility bills.
According to the National Energy Assistance Directors Association (NEADA), those households owe a total of $16 billion in unpaid utility bills. That figure is double what it was before the pandemic.
It’s the worst crisis NEADA has ever documented.
Some utilities have cut off more than 40% more customers than they did pre-pandemic in what one expert described as a “tsunami of shutoffs.”
The reality is that while Federal Reserve Chairman Jerome Powell speaks about the “strong underlying momentum” in the economy, regular Americans are struggling to keep the lights on during this period of Great Distortion.
Factors Behind the Rising Price of Natural Gas
There’s one main reason behind the spike in electricity costs. It’s the high cost of natural gas.
See, in 2021, natural gas accounted for 36.2% of U.S. electricity generation. That’s up from 27.6% in 2000.
You can see that growth in this chart. It shows the share of the total U.S. electricity supply provided by each of the main electricity sources since 2005.
As you can see, the share of electricity produced by natural gas (the blue line) has outpaced all the other sources, including petroleum, nuclear, and renewables, in recent years.
Today, U.S. natural gas prices are up 30.5% relative to a year ago. Earlier this month, they hit 14-year highs. This was largely due to the increased use of air-conditioning in this summer’s soaring temperatures.
In fact, natural gas futures – the price traders pay – have more than doubled over the last year, as you can see in this next chart. Oil futures are up about 40%. Meanwhile, the S&P 500 is down 11%.
Why the recent spike in natural gas prices?
On August 19, Russia announced that it is planning to shut down its main Nord Stream gas pipeline to Europe for maintenance. The shutdown is to last three days, starting tomorrow, August 31.
It’s not clear whether this is unplanned maintenance or if it is in retaliation for western Europe’s pro-Ukraine stance. Either way, it underscores the fragility of the world’s energy supply.
That’s because Russia is a major exporter of natural gas to the rest of Europe. The European Union (EU) gets roughly 40% of its natural gas from Russia. So countries there are scrambling to find alternative sources of energy and fuel, especially as winter approaches and the war in Ukraine continues.
For example, in recent months, we’ve seen a dramatic escalation in demand for U.S. shale gas from the United Kingdom and other parts of Europe.
All the uncertainty surrounding the natural gas supply is pushing global prices higher.
Added to that, EU sanctions on Russian oil and petroleum products are set to come into effect in the coming months, as I wrote to you last week.
This will have a knock-on effect on all energy prices across the globe.
Triple Whammy as We Head Into Winter
So this rise in natural gas prices isn’t a short-term phenomenon. And it’s destined to build into a crisis across the Atlantic this winter.
When the weather gets colder, demand for natural gas-fueled electricity will rise as a result.
And if prices spike because of what’s happening overseas, you can bet they will spike in the U.S., too.
In general, colder weather increases demand for natural gas for heating. This is true in both the residential and commercial sectors. That puts upward pressure on prices.
If the weather becomes unexpectedly cold or harsh, price spikes can intensify. That’s because supply can’t increase quickly enough to address that additional short-term demand.
This supply problem is exacerbated when cold winters follow very hot summers. And Europe has had its hottest summer on record.
Because of the soaring temperatures there, folks are using more natural gas to power things like air conditioners.
This means less natural gas is available for storage. And this, in turn, leads to lower available storage volume once winter hits.
So we have reduced supply due to geopolitical tensions. That’s coupled with higher demand due to a hot summer. And colder weather is approaching.
That triple-whammy is why we will see more natural gas price spikes as we head toward winter.
What This Means for Your Money
There are several types of companies that have already profited due to rising natural gas prices.
These include natural gas companies that either own or supply natural gas. It also includes companies that own or operate energy infrastructure and pipelines that deliver natural gas. Companies engaged in natural gas exploration have also benefited.
And I believe natural gas prices will continue to rise through the winter.
So, for the purest way to take advantage of that rise, I recommend the United States 12 Month Natural Gas Fund (UNL). It’s an exchange-traded fund (ETF) that tracks the price movements of natural gas.
And tomorrow, Wednesday, August 31 at 8 p.m. ET, I’ll be sharing the details of an even better opportunity.
At my Running on Empty Summit, I’m going to do a deep dive into the energy crisis… and what you can do to prepare your portfolio…
I’ll also share my FULL list of five sectors that will go up… as well as five that will go down as we head toward winter.
So be sure to reserve your spot for that right now.
And tune in to tomorrow’s Inside Wall Street… I’ll show you one of the five sectors that will perform the worst – and is best avoided right now – as a result of rising energy prices.
Happy investing,
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Nomi Prins
Editor, Inside Wall Street with Nomi Prins
P.S. At this event tomorrow night, I’ll also reveal a special investment that could hand you as much as 50 times your money. You won’t want to miss it.
So make sure to save your spot now, and mark your calendar for 8 p.m. ET tomorrow (Wednesday) night.