NEW YORK - The frigid winter of 2014 is setting the price of natural gas on fire.
Friday, the price in the futures market soared to $5.18 per 1,000 cubic feet, up 10 percent to the highest level in 3 1/2 years. The price of natural gas is up 29 percent in two weeks, and is 50 percent higher than last year at this time.
Record amounts of natural gas are being burned for heat and electricity. Meanwhile, it's so cold that drillers are struggling to produce enough to keep up with the high demand. So much natural gas is coming out of storage that the Energy Department said supplies have fallen 20 percent below a year ago - and that was before this latest cold spell.
"We've got record demand, record withdrawals from storage, and short-term production is threatened," said energy analyst Stephen Schork. "It's a dangerous market right now."
Natural gas and electric customers are sure to see somewhat higher rates in the coming months. But they will be insulated from sharp increases because regulators often force natural gas and electric utilities to use financial instruments and fuel-buying strategies that protect residential customers from high volatility.
To understand the price increase, just look at the thermometer. A second major cold snap this month is gripping much of the country, including the heavily-populated Northeast. And forecasters are now predicting colder weather in the weeks to come, extending south through Texas.
Natural gas is used by half the nation's households for heating, making it the most important heating fuel. Electricity is the second most popular heating source, and electric power generators use natural gas to generate power more than any other fuel except for coal.