South California’s Natural Gas Prices at their Lowest in Eight Years During December 2023: EIA

Natural gas prices at SoCal Citygate, the main price hub in Southern California, averaged $3.61 per million British thermal units (MMBtu) during December 2023, according to a March 25 report published by the U.S. Energy Information Administration. The average spot price during December 2023, was the lowest December spot price in eight years, when adjusting for inflation.

The low-price environment during December 2023 can be attributed to a number of factors including: above seasonal normal temperatures and therefore lower gas demand for household consumption, high natural gas inventories in storage sites, and increased hydroelectric power generation.

Natural gas demand is historically at its highest in California during December. Natural gas prices averaged $31.23 MMBtu during December 2022, driven by weather related demand. November 2022 was the coldest November in California in over 20 years and this led to tighter supply fundamentals and lower storage stocks and accordingly the price during December 2022 rose. California underwent 399 heating degree days (HDDs) in November 2022, 170 HDDs higher than the average over the previous five Novembers. Temperatures during December 2023 were mild and this contributed to the lower spot price. Temperatures in California during December 2023 led to 140 fewer HDDs than in December 2022 and 67 fewer HDDs than the average over the previous five Decembers.

Above seasonal normal temperatures lowered consumption in the residential and commercial sectors by 21 percent in December 2023 compared with December 2022. Moreover, consumption during December 2023 was 19 percent less than the previous five-year average. Lower demand led to lower natural gas prices, amid a comfortable supply outlook.

High natural gas storage inventories were evident in the market which contributed to the downward price movements during December 2023. During the start of December 2023 working gas stored was recorded to be 249.3 billion cubic feet in California, up 64.8 billion cubic feet compared to December 2022. The increase in storage can be attributed to the California Public Utilities Commission allowing Southern California Gas company to increase its working natural gas capacity.

Higher hydroelectric power production and reinstated pipeline capacity in the Southwest also contributed to the lower average spot gas price during December 2023 compared to December 2022. Hydroelectric power generation in California increased by 81 percent during December 2023 compared to the previous year, due to a series of atmospheric rivers during the 2023 water year.