Pricing pressures continue to build in the oil and gasoline markets as traders brace for a potential economic slowdown and increased oil production from OPEC+ in the coming months. While refined products like gasoline are also experiencing downward pressure, the decline has not been as sharp as in crude oil prices. Retail gasoline has seen only marginal price declines, offering some relief for consumers at the pump.

However, falling oil prices may lead to reduced domestic production as energy companies adjust to protect profit margins. Unfortunately, a consequence of these production cuts is a likely rise in utility prices, particularly those tied to natural gas.

According to the U.S. Energy Information Administration, 78% of U.S. dry natural gas production is tied to shale extraction. Shale production, which has grown rapidly in recent years, primarily targets oil but also yields significant volumes of natural gas as a byproduct. As oil prices decline and production slows, natural gas output may also fall—placing upward pressure on prices. That appears to be happening already: over the past two weeks, natural gas prices have surged more than 15%.

Normally, this time of year—known as injection season—sees natural gas prices decline as storage facilities are replenished ahead of peak summer demand. Yet the most recent Weekly Natural Gas Storage Report showed a smaller-than-expected inventory build, suggesting that lower production may already be impacting supply.

With natural gas prices rising ahead of the summer cooling season, when electricity demand increases, utility providers are likely to pass those higher input costs on to consumers. Although utilities make up a relatively small component of inflation metrics like the Consumer Price Index (CPI), sudden price increases can have a meaningful effect—potentially complicating the Federal Reserve’s efforts to justify interest rate cuts.

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