Rising gas prices won’t impact landlords’ energy bills, experts say

Utility costs have spiked in recent months, but the war is unlikely to make things worse


If your utility costs have spiked this winter, you are not alone.

Ann Korchak, a landlord and spokesperson for the group Small Property Owners of New York, said her Con Edison heating bill was up 43 percent in December, compared to two years prior.

Another SPONY member said National Grid charged him 60 percent more for natural gas last month than he paid in February 2021.

Tenants, meanwhile, have flooded social media with complaints of ConEd bills that they say have doubled from one month to the next.

The deluge prompted Gov. Kathy Hochul to ask ConEd to review its billing practices, while Attorney General Letitia James last week called on the energy provider to explain the price hikes.

ConEd has blamed rising energy costs, coupled with a colder-than-usual winter. As of last month, the price of natural gas, which is used to power heating systems and provide electricity to most city buildings, had tripled compared to February 2021, according to Bloomberg.

With the war in Ukraine pushing U.S. gasoline prices to new records and launching natural gas costs in Europe above previous highs, fears that the already-pricey utility could shoot even higher in the U.S. have begun to circulate online.

But experts say landlords’ energy costs will likely stay relatively flat for the remaining few months of the heating season.

For one, the commodity that’s driving price hikes at gas stations doesn’t have the same impact on natural gas costs. The price of gasoline used to fuel cars is largely tied to the price of crude oil, which surged 30 percent this week amid fears that embargoes could cut off Russian oil supplies, CBS reported.

The price of natural gas has historically correlated with that of crude oil — to an extent. From 2003 to 2020, for example, fluctuations in oil prices accounted for about a quarter of the changes observed in natural gas prices over the same period, according to Investopedia.

But analysts say that correlation has weakened in recent years. As a result, they say, surging oil prices won’t impact most landlords’ heating bills. The exception will be the minority of city landlords whose buildings run on heating oil, which correlates more closely with crude oil.

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“I feel bad for the 15 percent of the [multifamily] market in the five boroughs that’s still on heating oil,” said Jim Slattery, CEO of Slattery Energy Group, an energy advisor to New York City building owners.

As for the surges in natural gas costs observed in Europe, analysts say infrastructure constraints should isolate the U.S. from a similar fate.

While Europe relies heavily on imports to satisfy its energy needs, the U.S. essentially produces all the natural gas it needs, said Sean Morgan, a director at Evercore specializing in liquefied natural gas equity research. For that reason, President Joe Biden’s ban on natural gas imports from Russia will have little bearing on U.S. supply.

“We are mostly self-sustaining,” Morgan said.

And while the U.S. has the ability to send liquefied-natural gas to Europe, it’s already exporting as much as it possibly can, Morgan said, meaning there’s no immediate threat that European demand could pressure U.S. reserves and push up prices.

To increase its export capacity, the U.S. would need to build more infrastructure, a process that Morgan said could take four to five years. That investment could theoretically lift prices, he said, but such a hike would be several years out. Plus, to meet larger export quotas, energy companies would ramp up production, which would limit price increases.

“As much as the U.S. would profit from selling more gas, we’re at maximum capacity,” Morgan said. “That’s why you’re seeing U.S. gas trading at such a huge discount to Europe.”

Natural gas futures support that narrative. As of the market’s close on Tuesday, prices for natural gas were expected to hit $4.56 per million BTU in April, down from the $6.70 per million BTU high they reached in February and in line with the $4.36 per million BTU they settled at in early March, according to the Henry Hub Natural Gas Spot Price and Futures indices.

“For that reason, I have a really hard time being pessimistic about natural gas right now,” said Slattery.

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