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Source: FactSet (Henry Hub spot NYMEX); Chart: Axios Visuals

This past fall, surging energy prices were one of the most visible and alarming side effects of the world’s monumental effort to reopen economies all at once.

  • But just a few months later, a warm start to the winter — and worries that the Omicron variant will cause a slowdown — have cut the price of one of America’s main fuel sources nearly in half from its peak.

Why it matters: Natural gas is a major source of heating and electricity for American homes. Heading into the winter, these lower prices shouldn't cause the pocketbook shock that analysts had recently feared, as growing inventories change the pricing landscape.

  • Compare that to Europe, which doesn't produce its own gas and still faces steep shortages.

State of play: Rising prices in the U.S. often stem from the size of natural gas inventories held in storage.

  • In September, when prices were climbing toward their peak, storage levels had shrunk to 7.4% below the five-year average — thanks to a combination of the rapid demand increase from the reopening, the cooling needs from a hot summer, and then the disruption from Hurricane Ida, Sindre Knutsson, natural gas analyst at Rystad Energy, tells Axios.
  • But storage levels have recovered — in large part because of the unseasonably warm start to winter — and over the past few weeks are hovering right around the five-year average, according to the Energy Information Administration.

The EIA’s next weekly report will probably show a surplus to the average for the first time since February, analysts at BofA Global Research write.

The big picture: Weather can turn on a dime. A colder U.S. winter would likely deplete some of the inventory. But don’t expect prices to head back to the $5 or $6 area, Knutsson says.

  • More likely, are bouts of short-term volatility. "The market is much more healthy than it was" a few months ago, and can withstand a few cold snaps, he says.

Meanwhile: Oil prices have eased as well. U.S. crude had its worst day of the month yesterday, down 3.7% — and is off 19% from its November peak.

  • However, oil prices still face many of the same longer-term supply and demand dynamics that pushed them up in the first place, says Phil Orlando, chief equity market strategist at Federated Hermes.
  • And the Omicron economic cycle will pass, as other COVID waves have, he adds. “I expect energy prices in the first quarter of next year are going to be higher than they are now,” he says.

The bottom line: To some degree, that may depend on the weather.

Go deeper

Hope King, author of Closer
Jan 14, 2022 - Economy & Business

Record level consumer demand drops as high prices surge

Data: FRED; Chart: Thomas Oide/Axios

Record levels of consumer demand are petering out as high prices cut into wages and add to household worries.

Why it matters: Shoppers will hold off on buying if goods get too expensive — a trend that if big enough could slow down economic growth.

Updated 34 mins ago - Politics & Policy

Omicron dashboard

Illustration: Shoshana Gordon/Axios

  1. Health: Axios-Ipsos poll: Omicron's big numbersAnother wave of death — FDA limits use of Regeneron and Lilly antibody treatments — Fauci: "Confident" Omicron cases will peak in February.
  2. Vaccines: Pfizer begins clinical trial for Omicron-specific vaccine — The shifting definition of fully vaccinated.
  3. Politics: Biden admin withdraws temporary vaccine-or-test mandate for large employers — New York Supreme Court strikes down Gov. Hochul's mask mandate for public areas — Sarah Palin tests positive, delaying defamation trial — Virginia school boards sue Gov. Youngkin for lifting mask mandate.
  4. World: U.K. to lift travel testing requirement for fully vaccinated — Beijing Olympic Committee lowers testing threshold ahead of Games.
  5. Variant tracker

The Robinhood M&A rumor mill churns

Illustration: Sarah Grillo/Axios

Robinhood's valuation is now just over $11 billion, a fraction of where it traded in August and below that of its last private round of funding. Cue the M&A mongers.

Why it matters: It's not just Robinhood—falling values of growth-oriented tech stocks have raised speculation that formerly high-flying fintechs could be snapped up by more well-capitalized buyers.

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