When Natural Gas Prices Break Records, Manufacturers Break Budgets: Here’s the Fix

“Natural Gas Hits Record Highs“

If you saw that headline on January 24, 2026 and thought “we need to do something about our natural gas costs,” you were already too late.

By the time record-breaking prices make headlines, the damage is done. Variable-rate manufacturers were already facing bills multiple times higher than normal. Utilities were already implementing curtailments that threatened production continuity. Spot market alternatives were already priced at catastrophic levels. The window for action had closed weeks earlier back in November and December 2025 when forward prices seemed “too high” at a fraction of the late January pricing.

The manufacturers who weathered January’s crisis weren’t reacting to headlines. They were positioned ahead of them, based on market intelligence that signaled trouble months before prices exploded.

Here’s what that headline didn’t tell you: Regional delivery markets hit $125 per dekatherm, supply point prices surged to $60 per dekatherm, and manufacturers without alternative fuel strategies faced production shutdowns when curtailments hit.

The difference between manufacturers who experienced a budget inconvenience versus those who experienced a budget catastrophe? They made their natural gas procurement decisions before the headlines, not after.

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Why Volatility Won’t Go Away (And Why This Spike Could Have Been Worse)

What made January’s event different (and terrifying) was what didn’t happen. We were incredibly lucky this time because in past winters when we’ve had such extreme weather, we’ve had pipelines that had operational issues. This time everything worked. There were freeze-offs related to temperatures, but pipes remained operational. Imagine what would have happened if pipeline integrity was compromised.

The implication is sobering: January’s spike occurred under relatively favorable infrastructure conditions. Future extreme weather events with operational failures could produce even worse outcomes.

The structural shift manufacturers missed:

We cannot understate how much volatility is in the natural gas market right now and that’s not going to go away. Volatility is going to increase because of how much more demand there is.

Natural gas volatility isn’t temporary… it’s the new baseline driven by fundamental market changes:

• Growing LNG Export Demand: U.S. LNG exports increased 26% in 2025 and continue growing through 2027. Domestic manufacturers now compete with global markets for supply, creating persistent upward pressure on prices during tight conditions.
• Data Center Boom: The explosion of data center development, driven by artificial intelligence and cloud computing, is creating unprecedented electricity demand. Natural gas-fired power generation supplies the capacity needed to support this growth, tightening domestic markets.
• Pipeline Capacity Constraints: There’s only a finite amount of capacity on existing pipelines. When demand surges during extreme weather, manufacturers compete for limited transportation capacity with residential heating, power generation, and export facilities.

Production is increasing, but not at the same pace as demand. When we’re looking at the forward prices, they look undervalued given all of the strong demand signals: the LNG exports, the data center boom. There are so many more homes for the gas than production.

What made January severe: The storm created a perfect combination. Residential and commercial consumption averaged 29% higher than the five-year average while production fell 4 Bcf/d as wellhead equipment froze. Storage withdrawals hit 360 billion cubic feet—the largest weekly withdrawal ever recorded.

We had blowouts at the delivered markets but we also had extremely high supply point prices. Prices that might reach $12 per dekatherm went to $60 at supply points. That’s huge. The demand side was increasing, but our supply was constrained due to how cold it was.

The Three Mistakes That Amplified Pain

Mistake #1: 100% Variable Pricing with No Forward Coverage

Consider a large manufacturer who may have declined forward pricing in Q4 2025 because forward pricing appeared higher than recent historical averages. Rather than locking in, they might have maintained 100% variable exposure, betting that prices would remain moderate through winter.

Under normal conditions, this approach creates manageable exposure. But January wasn’t normal. When spot prices surged to $125 per dekatherm, variable prices could have exceeded $20 per dekatherm. For a manufacturer consuming 100,000 MMBtu monthly, the difference between normal variable pricing (~$10/dekatherm = ~$1M monthly) and January pricing (~$20/dekatherm = ~$2M monthly) would represent $1 million in unexpected costs in a single month.

Why manufacturers made this mistake: Forward prices appeared elevated compared to recent history. Manufacturers missed that the forward market was pricing in higher risk: risk that materialized in January.

Mistake #2: No Curtailment Planning or Alternative Fuel Strategies

The price spike wasn’t the only crisis; many manufacturers experienced supply curtailments threatening production continuity. Curtailments can impact manufacturers, and UGI had several curtailments.

Production doesn’t care what temperature it is outside. Manufacturers just need to produce. When utilities curtail industrial customers to prioritize residential heating, manufacturers face production shutdowns and lost revenue exceeding energy costs.

Mistake #3: Single-Supplier Dependence Without Regional Diversification

Regional price dislocations created massive differences between delivery points. Manufacturers locked into constrained regions paid 2-3× more than those with access to alternative supply points, with no ability to shift volume during the crisis.

How Shipley Energy’s Unique Capabilities Protected Manufacturers

While most manufacturers suffered through January’s spike, those working with Shipley Energy experienced dramatically different outcomes through market intelligence, forward positioning, and capabilities that differentiate Shipley from traditional suppliers.

Market Intelligence That Saw This Coming

Shipley’s market intelligence team tracked converging factors through Q4 2025: storage inventories trending toward five-year averages, LNG export flows reaching record levels, and long-range weather forecasts suggesting colder-than-normal January.

Forward prices look undervalued to us given all of the strong demand signals. This intelligence enabled proactive recommendations to increase forward coverage while prices remained favorable in November-December 2025, ahead of January’s spike.

Alternative Fuel Capabilities That Prevented Production Shutdowns

For manufacturers with dual-fuel capabilities, we can seamlessly orchestrate the fuel switching process. When natural gas supply is interrupted or curtailed, we can coordinate alternative fuel delivery to ensure production continuity.

Creative Hedging Solutions Beyond Standard Contracts

Larger manufacturers may have the freedom to take advantage of more creative hedging options beyond standard forward pricing or blended contracts. These might include NYMEX hedging, basis hedging, market caps, and various option arrangements tailored to specific operational patterns and risk tolerance. It’s not a one-size-fits-all approach—manufacturers with more complex needs can work with Shipley to structure hedging solutions that fit their particular requirements.

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Building Spike-Resilient Procurement Strategies

1. Implement Forward Price Coverage with Strategic Timing

Forward pricing decisions require market intelligence. The insight that forward prices look undervalued given all the strong demand signals illustrates the importance of working with advisors who track fundamentals rather than making decisions based solely on historical comparisons.

2. Establish Alternative Fuel Capabilities and Curtailment Contingencies

Manufacturers in curtailment-risk regions should establish relationships with suppliers capable of providing alternative fuels during natural gas interruptions. Planning in advance will help reduce any impacts from disruptions.

Consider dual-fuel equipment capability, pre-arranged supply agreements, and on-site storage for alternative fuels. The cost of maintaining these capabilities is measured against production shutdowns and missed customer commitments.

3. Work with Suppliers Who Provide Market Intelligence

Manufacturers shouldn’t make natural gas procurement decisions in isolation. Working with suppliers who provide ongoing market intelligence enables proactive positioning rather than reactive crisis management.

Shipley Energy provides regular market updates, forward curve analysis, and strategic recommendations based on observable fundamentals: storage trends, production data, weather forecasts, export flows, and demand indicators.

4. Evaluate Total Supply Relationship, Not Just Price

When selecting natural gas suppliers, evaluate capabilities beyond headline pricing:

• Can the supplier provide alternative fuels during curtailments?
• Can the supplier structure creative hedging solutions?
• Does the supplier provide proactive market guidance?

5. Integrate Natural Gas Strategy with Competitive Positioning

Natural gas procurement strategy directly impacts competitive positioning. Manufacturers with stable, predictable costs can offer fixed-price contracts to customers, bid more aggressively on new business, and maintain customer relationships without mid-contract renegotiations.

What’s Next: Sustained Volatility Requires Sustained Strategy

Following January’s spike, prices quickly retreated as weather normalized. But structural factors persist and intensify: LNG export capacity continues to grow, data center demand shows no signs of slowing, and pipeline constraints remain. Volatility is going to increase because of how much more demand there is.

We were incredibly lucky this time because everything worked operationally. January 2026 wasn’t an anomaly; it’s the new reality. Volatility is the baseline, and manufacturers without strategic procurement approaches will continue experiencing crises while strategically prepared competitors maintain stable costs and capture market share.

Partner with Shipley Energy for Strategic Natural Gas Procurement

Why Manufacturers Choose Shipley Energy:

Market Intelligence Team: Our experts provide proactive recommendations when conditions warrant strategic action. We saw January’s spike coming through monitoring storage trajectories, export flows, weather patterns, and forward curve signals.

Alternative Fuel Capabilities: When curtailments threaten production, we orchestrate alternative fuel delivery to maintain operational continuity, preventing production shutdowns for multiple manufacturing customers during recent curtailment events.

Custom Hedging Solutions: Large manufacturers benefit from sophisticated approaches including market caps, basis hedging, and option arrangements that extend beyond standard forward pricing.

Regional Expertise: Established in 1929, Shipley Energy has deep Mid-Atlantic supplier relationships and understands regional basis differentials across PA, MD, and OH.

If your manufacturing operation experienced significant budget impact from January’s spike, faced curtailment threats, or recognizes the need for more strategic natural gas procurement, Shipley Energy can help. Contact us to discuss how strategic approaches can protect margins, enable competitive pricing, ensure operational continuity, and provide the alternative fuel capabilities that differentiate Shipley from traditional natural gas suppliers.

Get Started on your Procurement Strategy