Winter is coming. And the cost of heating your home could shoot up 30%, analysts warn

You might want to sit down when you open your gas bill this winter.

While the price of natural gas has already doubled in the past year, energy analysts say it could be shooting up another 30 per cent in the next few months, pushed by cooler weather, and Russia shutting off the taps to European consumers.

One thing for certain is that if cold weather arrives early, the overseas natural gas crisis will start washing up on North American shores. It might be a good time to take out flood insurance," Desjardins Securities energy analyst Chris MacCulloch wrote in a recent note to clients.

MacCulloch noted that natural gas inventories across North America are down substantially from last year, and are well below the five-year average. In Eastern Canada, MacCulloch noted, there was 13 per cent less natural gas in storage at the end of August than there was at the same time last year. In Western Canada, there was 10.1 per cent less.

In June, the Ontario Energy Board approved a roughly 20 per cent increase in the price natural gas distributors such as Enbridge can charge to residential consumers. The distributors can seek permission four times a year to get an increase, based on what their own costs for buying the gas have been, or are anticipated to be; if prices are going up on the world market, they eventually catch up for homeowners. The increase, which took effect July 1, was the third price hike this year. Customers of Enbridge Gas's GTA division, now pay 26.868 cents per cubic metre, up from 17.709 cents in April and 14.520 cents at the beginning of the year.

According to an estimate from the OEB, the latest increase pushed the average bill for Enbridge consumers to $126.83 a month.

It's tough for people on a fixed income," said veteran oil and gas industry economist James L. Williams of WTRG Economics.

A spokesperson for Enbridge said the company has seen a slight increase in delinquent payments during the price surge, but added the company is trying to mitigate the impact on customers by offering flexible payment plans, and also by spreading increases over 24 months, rather than 12.

On the New York Mercantile Exchange, natural gas was trading at roughly $4 (U.S.) per million BTUs this time last year. Now, it's closer to $9.

How much higher could it go?

Williams said it depends largely on what Russian President Vladimir Putin does, both in his continuing invasion of Ukraine, and in how it deals with European customers for Russia's natural gas. Monday, Russia announced that its key Nord Stream 1 pipeline would be closed indefinitely because of a leak.

Nobody knows what Russia's going to be doing in January or February. I don't expect it will go up more than another 30 per cent from where it is now. But $15 isn't completely out of the question," said Williams, pointing out that in Europe, the price of natural gas is already closer to $30 per million BTUs.

That price difference, says Williams, means North American producers, who are already mostly at capacity, have more incentive to ship their natural gas across the Atlantic, even though it must be converted to liquid form for shipping. That conversion, from the gaseous form that flows through pipelines, typically means 15 to 20 per cent of the gas is lost.

Even though they lose 15 to 20 per cent of the gas converting it for shipping, they've got a $20 cushion to play with. That's a huge amount," said Williams.

Countries across Europe, which are even more dependent on natural gas for heating and generating electricity than North America, are increasingly desperate to get their hands on it as Russia continues to close off its Nord Stream pipeline.

While Russia officially blamed its Nord Stream shutdown on technical issues, Williams says it's clear the move is retaliation for sanctions levied against the country in the wake of its invasion of Ukraine. Putin, says Williams, is ratcheting up the pressure on European countries desperate for heat as winter approaches.

Russia says they're cutting off Nordstream 1 and basically they've indicated it will continue as long as the EU has sanctions," said Williams.