Saturday, December 2, 2023

American homes are also suffering from expensive energy

One would have thought the United States immune to the high cost of energy that has overwhelmed Europe since the invasion of Ukraine, and has prompted the creation of various state “shields”. Paradoxically, in the land of oil wells and shale gas, consumers are also suffering.

One in six households are in arrears with their electricity bills, according to the National Energy Assistance Directors Association (Neada). This organization oversees, on behalf of the States, the distribution of 4 billion dollars in annual federal financial support to households in fuel poverty. The cumulative amount of unpaid amounts to nearly 16 billion dollars, twice as much as before the Covid crisis.

In 2020, when unemployment jumped because of the epidemic, many households could not pay their dues. To this debt is added since the beginning of the year a rapid inflation of electricity bills for individuals. They grew by 15% over twelve months in July, while gas bills rose by more than 30%.

“We estimate that the price of air conditioning has gone from $450 last year to around $600 this summer. In addition, families have been affected by high prices at the pump, especially those on low incomes who have fewer possibilities of telecommuting,” comments Mark Wolfe, director of Neada. The price of a gallon of gasoline has indeed increased from 3.15 dollars to 3.88 dollars. Because of these out-of-control bills, “many of them have to arbitrate between food purchases and other essential consumption,” he notes.

Better to sell gas to Europeans

An unprecedented situation since the United States began to massively exploit their shale gas deposits. This windfall provided the country with a decade of cheap and abundant energy. Both consumers and businesses have benefited. But this is no longer enough to contain the inflation of electricity bills, the latter being often produced using gas. Tariff increases on the wholesale market are beginning to be passed on to households with a delay.

Episodes of extreme heat this summer in the United States prompted Americans to turn on their air conditioners fully, while shale gas production increased moderately. This strong demand weighed on stocks, and forced suppliers to restock at high prices.

Added to this is an inflationary international context: the war in Ukraine, the intermittent closing of the Russian gas tap and, in Europe, the desperate quest for new suppliers to fill their tanks before winter. From January to April, the United States sent three-quarters of its liquefied natural gas to the Old Continent by ship. The prices there are much more attractive for sellers than on the American domestic market.

Energy efficiency grants

Moreover, the markets reacted promptly when they learned on Wednesday that the liquefied natural gas export terminal in Freeport, Texas, out of service, would reopen in mid-November. The price of US gas futures, which had just climbed to the same level as in 2008, immediately took a nose dive. This will somewhat loosen the supply on the American market.

However, “gas exports are still limited and are not the main factor in the rise in prices in the United States”, puts Mark Wolfe into perspective.

To reduce Americans’ electricity bills, the government is counting on the energy efficiency measures of the inflation reduction law passed in August. It provides subsidies of up to 100% of the purchase price for low-income households who will equip themselves with low-consumption heat pumps, stoves or dryers, and $4,000 to acquire an electric vehicle from opportunity.


Please enter your comment!
Please enter your name here

Latest article