What Does It Mean To “Lock In” Natural Gas Prices?

If you’re in the market for a new natural gas plan, one of the most important questions to ask is when you should make the switch. By knowing the best time to lock in your gas price, you could secure a better long-term deal for yourself.

What do we mean by locking in your gas price? It’s simple. Locking in a natural gas price means entering a contract with a supplier in which the cost of natural gas is fixed (i.e., it stays the same throughout the period of the contract).

By locking in a price, you avoid the roller coaster of market rates that typically happen over the course of your contract term. You could save a lot of money too!

The Best Time To Lock In Natural Gas Rates

Natural gas is a relatively cyclical market—meaning that prices usually rise and fall in predictable ways from year to year. Ideally, if you’re not currently committed to a contract with an energy supplier, you should start your new agreement during a time of the year when prices are typically at their lowest—aka the “shoulder months.”

What Are The Shoulder Months?

The “shoulder months” are times of the year when the market for fuel is shifting between periods of high and low demand—here in the Northeast, that’s typically March/April and September/October. During these periods, moderate temperatures mean less reliance on natural gas for heat or to power the electrical plants that meet the need for increased air conditioning use.

Lower usage causes market prices to drop, making the shoulder months the best time to lock in natural gas rates.

Why Do Natural Gas Prices Change So Often?

There are many factors that influence the cost of natural gas, and most of them are difficult to predict. Here are some of the factors that have a big impact on the supply-and-demand picture for natural gas, and therefore the cost of natural gas in general.

• Weather cycles. Demand for natural gas is highest in the winter, when we’re using more for heat, and in the summer, when more electricity is needed for air conditioning (natural gas powers many of the nation’s electric power plants).
• Extreme weather. Severe weather can lead to fuel production interruptions, including the production of natural gas. Less production equals a higher price per therm (the unit used for measuring heat).
• Natural gas reserves. Natural gas reserves in America are limited; as supplies dwindle, the price of natural gas typically rises.
• Natural gas production. If companies have to spend more to produce natural gas, prices will probably rise.
• Competition with other fuels. If coal or petroleum prices fall, consumers will have viable alternatives to choose from, causing natural gas prices to drop.
• Policy. The U.S. government can influence natural gas prices using common tools such as taxes and environmental regulations. International affairs can also affect the natural gas market.

Should You Lock In Your Natural Gas Rate Now?

Although we can’t guarantee that prices will be lower now than at any other time, for the reasons detailed in this article, this is typically a good time to lock in natural gas prices for the year. If you aren’t currently committed to a supplier contract, you may well be able to enjoy a lower and more stable supply rate for the months to come.

Looking for a new natural gas supplier? Switch to Discount Power! We offer locked-in and variable-rate payment options so that you can get your plan, your way. Contact us today to learn more, or simply enroll online to get started!