The dramatic collapse of US natural gas prices this year is quietly helping to boost the nation’s economy, slashing some energy costs even as the prices of other necessities continue to rise.

While natural gas doesn’t grab attention quite like crude oil, it’s a behind-the-scenes fuel that permeates the economy, used to heat homes, generate electricity, run factories and make fertilizer. When gas futures surged in 2021-2022, the ripple effects hit consumers and manufacturers alike. Now that prices have plummeted to the lowest in four years, the relief is becoming apparent.

The clearest impact on costs so far is for American households that use gas to heat their homes. Consumer gas bills fell about 9% in February compared with a year earlier, the latest consumer price index data show. That helped to cap nearly a year of steady declines.

The drop in gas underscores the waning impact that energy is having on the wider cost of living in the US. In June 2022, the sector was contributing to about one-quarter of overall inflation, and now that’s dropped to essentially zero, CPI data show.

That could be good news for President Joe Biden’s reelection bid as lower energy prices help counteract other sectors. And it’s a big win for consumers with homes that rely on gas. Many people with tighter budgets have struggled to pay utility bills in recent years.

“Energy makes up a significant part of the household budget, and it makes up a much larger portion for those who are less economically advantaged,” said Ed Hirs, an economics lecturer at the University of Houston.

While the clearest benefit from the price drop has so far come in utility bills, the decline is poised to start filtering through to other sectors of the economy.

Companies often hedge for significant price movements in natural gas. Those that locked in costs at higher levels will continue to reap rewards as those bets unwind and businesses take advantage of the current lows.

Natural gas is used to make ammonia and nitrogen fertilizers, making it key to global food production.

Fertilizer maker CF Industries Holdings Inc. said in a February earnings call that while the company didn’t take full advantage of recent declines in prices due to hedging, it’s getting benefits from the drop in daily cash rates.

Executives from Century Aluminum Co. recently cited “attractive levels” for its Midwest power prices, driven by lower natural gas costs. Road builder Construction Partners Inc. has also pointed to the “slight tailwind” of the lower gas price. 

The rout for natural gas — with futures in New York falling under $2 per million British thermal units last month — is a stark contrast from two years ago, when the commodity was at the center of an energy and economic crisis as prices skyrocketed to a 14-year high rising above $9.

The surge was exacerbated by Russia’s invasion of Ukraine. As Europe weaned itself off Russian gas, it started a global scramble for supplies. Futures had already been moving higher in the months leading up to the invasion after years of underinvestment in the sector left the market historically tight.

But the high prices helped cure the supply problem. US production has soared to a record. That’s come simultaneously with an unusually mild winter, dampening demand for the fuel to heat homes.

Meanwhile, European gas prices have eased significantly from the peak of the energy crisis, with mild weather and still sluggish demand contributing to the slide. Still, prices remain well above pre-crisis levels as volatility has become more common.

The continued outlook for the market will likely be a big topic of conversation at the CERAWeek by S&P Global energy conference in Houston next week. Most market watchers expect prices to remain subdued for at least the next few months.

Many manufacturing plants are powered by natural gas. If they can lower their energy costs, that’s a huge competitive advantage, said Carl Neill, a senior energy analyst at StoneX Group.

“It’s giving relief on something at a time when almost nothing is giving you relief,” Neill said.

This article was provided by Bloomberg News.