By Mark Jaffe, EUCI energy writer
The U.S. is the world’s biggest natural gas producer – with three regions in the country each producing more gas than most countries – but demand continues to outpace production leading to higher natural gas prices.
“Retail U.S. natural gas prices for every sector have increased so far this year, although the increases are uneven across sectors,” according to the federal Energy Information Administration (EIA).
The average natural gas price paid by electric power plants – the largest consumer of natural gas – is estimated to increase 37%, to about $4 for a thousand cubic feet, and the price paid by the industrial sector is set to rise 21% compared to 2024 prices.
“The wholesale price of natural gas more directly affects prices for industrial and electric power consumers of natural gas,” the EIA said. “In those sectors, the year-over-year changes in retail natural gas prices closely follow the year-over-year changes in the natural gas spot price at Henry Hub.”
Monthly natural gas prices at the Henry Hub, a major wholesale distribution point, are projected to be up 58% year-over-year. The average October Henry Hub spot price was $3.19 for a million British thermal units.
The wholesale prices have less of an impact on residential and commercial prices, which the agency projects will rise 4% compared to 2024.
Since 2009, the U.S. has been the world’s largest natural gas producer and has increased production 26% between 2021 and May 2025, according to the EIA. For the first half of 2025, production averaged 106 billion cubic feet a day.
The Appalachia region is ranked as the second largest gas producing area in the world, followed by the Permian Basin, which straddles Texas and New Mexico, as the fifth largest producer, and the Haynesville region, covering Texas, Louisiana and Arkansas, as the eighth.
That, however, has not been enough to moderate prices and keep pace with the market.
“Higher natural gas prices in 2025 and 2026 are the result of strong export growth that persistently outpaces U.S. natural gas production,” the EIA said.
Two “long-term trends” are pushing wholesale natural gas prices higher – the increasing use of natural gas by the electric sector and exports of liquefied natural gas (LNG), according to the Institute for Energy Economics and Financial Analysis (IEEFA).
Natural gas has become the preferred fuel for the utility industry, rising to power a third of electricity generation in 2025 from 16.5% two decades earlier.
At the same time, demand from LNG exporters jumped by 140% between 2019 and 2024, according to EIA data, making it the fastest-growing source of U.S. natural gas demand.
LNG export volumes for the first half of 2025 rose 20% from the year before to a record high of 2.57 billion cubic feet, according to EIA data.
LNG exports fetch higher prices than domestic sales – average $7.51 per thousand cubic feet in August, placing additional pressure on large, wholesale consumers like the utility industry.
“Consumers will not just be paying for that higher-priced gas generation,” the IEEFA said in a white paper, “because gas generation is such a large component of the overall electricity market, it now sets the marginal price for all generation in many markets across the U.S., particularly during peak demand periods.”
“This means the rise in gas exports is contributing to higher electricity prices across the board – the costs of which will be passed through to consumers,” the IEEFA said.
The EIA is forecasting average electricity prices in 2025 will be $47 a megawatt-hour, up 23% from 2024 and will continue to rise reaching $51 a megawatt-hour in 2026.
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