Why energy prices are going up

Power transmission high voltage lines on the white supports against blue sky
glebchik / Shutterstock

Prices for natural gas, crude oil and petroleum products are at or near multi-year highs, according to the U.S. Energy Information Administration (EIA). The main reason boils down to Economics 101: Demand has increased faster than supply.

On the demand side, the economy is growing again. More businesses are open and consumers are returning to their pre-pandemic habits.

Constraints on the supply side include a recent hurricane in the Gulf of Mexico that knocked oil and gas production offline and suppliers that haven’t kept up with the increased demand — here and around the globe.

“As we have moved beyond what we expect to be the deepest part of the pandemic-related economic downturn, growth in energy demand has generally outpaced growth in supply,” says Steve Nalley, the EIA’s acting administrator.

“These dynamics are raising energy prices around the world.”

What’s more, meteorologists are predicting a slightly colder winter this year than last, according to the EIA report.

If this winter is 10% colder than average, households that heat with natural gas could spend 50% more than they did last year.

Those who heat their homes with electricity — just over 40% of all households — can expect to spend 6% more than last year — or 15% more if temperatures fall lower than expected.

Ways to slash your energy bills

Energy efficiency concept with charges invoice documents on desk
tommaso79 / Shutterstock

If you’re willing to put in just a little effort, there are several ways to reduce your heating bills.

1. Wrap the water heater

Your furnace and water heater use the highest amounts of natural gas in your home, according to New Mexico Gas Co. And as much as 25% of every energy dollar that goes toward heating water.

If your water heater is in the garage, it gets colder and takes longer to keep the water hot. Try covering it in a wrap to slow heat loss from the tank and help keep it running more efficiently.

2. Use your fireplace wisely

Cold fall or winter evening. People resting by the fire with blanket and tea. Closeup photo of feet in woolen socks. Cozy scene.
Alena Ozerova / Shutterstock

If you have a fireplace, you can turn your heater way down. Just don’t forget to close the damper when you’re not using it, because that’s where cold air can come in.

3. Keep the temperature down

If possible, keep your thermostat at 68 degrees or lower. Up to 5% more energy is used for each degree you set your furnace to above 68, according to San Francisco-based Pacific Gas and Electric.

4. Preserve the heat

Grab a tube of caulk to fill in gaps and cracks around door frames and windows where air may be seeping through.

5. Get an energy audit

House Energy Efficiency Audit. Calculating Money Invoice
Andrey_Popov / Shutterstock

Find out if your utility company offers a free or low-cost energy audit. An assessment of your heating and cooling system can identify if your home is wasting energy through door or window leaks or insufficient insulation.

Alternatively, the Department of Energy offers tips on how to conduct a DIY assessment.

6. Seek out a payment plan

Ask your utility company if they have a budget payment program. It might not cost less over the long term, but some companies offer billing programs that spread your energy costs throughout the year to make it easier to budget and plan.

7. Fix leaks and drips

Leaky faucets and pipes can stress your water heater, increasing the amount of natural gas it uses. One drop of water per second can waste 500 gallons of hot water per year, according to Los Angeles-based SoCalGas.

How to save on other bills this winter

Planning Family Budget. Smiling african american man holding paper, working and reading documentation at home, woman drinking coffee and looking at him, sitting on the couch with laptop
Prostock-studio / Shutterstock

Once you’ve turned down your thermostat a few degrees, grab a cup of hot cocoa and take a few minutes to see if you’re able to save on some of your other bills.

  • If you haven’t shopped around for car insurance in the last six months, you could easily be overpaying. Compare rates from multiple insurers to see if you can find a better deal on the coverage you need.
  • It’s hard to get ahead if you’re stuck with high-interest credit card debt. Consider paying off those balances with a single, low-interest debt-consolidation loan. That will leave you just one bill to deal with and potentially free you from debt years sooner.
  • And while today’s rising prices for just about everything are making it hard to save — much less invest — a popular app helps you grow a diversified portfolio by investing just your “spare change”.

About the Author

Nancy Sarnoff

Nancy Sarnoff

Freelance Contributor

Nancy Sarnoff is a freelance contributor with MoneyWise. Previously, she covered commercial and residential real estate for the Houston Chronicle where she also hosted Looped In, a podcast about the region’s growth, development and economy. Her work has been recognized by the National Association of Real Estate Editors and the Society of American Business Editors and Writers.

You May Also Like

Looking For Passive Income? There's One Option Right Below Your Feet

One company’s innovative approach makes farmland investing easier and more accessible.

How to Get a Free Credit Score

It's simpler than ever to get a free credit score.

Do Big Stores Save You the Most? We Price-Check Our Shopping List

With one 30-second trick, we found $460 in savings beyond Walmart and Amazon.

3 Ways to Earn Big Returns Without the Shaky Stock Market

Don't limit yourself to the stock market. These alternatives can trounce the S&P 500.