What Fleet Owners Need to Know About Natural Gas Prices and DEF Costs

Have you ever wondered how the price of natural gas affects DEF (Diesel Exhaust Fluid)? While it might seem like these two are worlds apart, their connection runs deeper than you might think.

Let’s start with the basics. Natural gas is a fossil fuel primarily composed of methane. It is used for heating, electricity generation, and as a feedstock in manufacturing processes. It plays an important role in the production of many everyday products, such as fertilizers, cleaning products, and Diesel Exhaust Fluid (DEF).

Impact on Ammonia, Urea, and, consequently, DEF

Why does natural gas affect ammonia and urea prices so directly? The answer lies in the production process. To produce ammonia (which is used to make urea), 70–90% of the cost is tied to natural gas. This makes ammonia prices extremely sensitive to fluctuations in the natural gas market. When natural gas prices rise, ammonia prices follow suit, driving up the cost of urea—the main ingredient in DEF.

For DEF production, this is a significant concern. Since ammonia prices are closely tied to natural gas prices, any increase in natural gas costs is passed along to the price of urea and, ultimately, DEF. The higher the cost of raw materials (urea and ammonia), the more expensive DEF becomes.

What is Urea?

Urea is a key ingredient in DEF, made from ammonia and carbon dioxide—both sourced from natural gas. In recent years, the urea market has seen major price swings due to supply chain disruptions, production challenges, and the ongoing Russia-Ukraine war.

To manage this volatility, many DEF producers changed their pricing strategies. One approach was to limit the amount of DEF available at indexed pricing, breaking away from the NOLA index, which has traditionally set DEF prices in North America. By doing this, producers aimed to shield DEF prices from broader commodity fluctuations and create more stability in the market.

The Natural Gas Price Surge

Let’s take a look at natural gas prices lately. By February 2025, prices had surged by 160%, a significant increase from 2024. The main driver behind this rise is an unexpected spike in demand, especially from colder winters in North America and Europe. When temperatures dip, demand for heating and power generation goes up, leading to higher natural gas consumption.

According to the EIA’s Short-Term Energy Outlook (STEO February 2025), the Henry Hub Natural Gas price averaged $4.13 per million British thermal units (MMBtu) in January, reaching a daily high of $9.86/MMBtu on January 17, ahead of a cold snap that triggered above-average inventory withdrawals. The agency expects this volatility to continue, with the price forecasted to rise through 2026, averaging nearly $3.80/MMBtu in 2025 and reaching almost $4.20/MMBtu by 2026.

According to the IEA, Europe has faced a major shift in gas availability. Europe’s volatile natural gas market in early 2025 has added another layer of uncertainty. Prices surged to their highest level in two years earlier this month, adding to the strains faced by businesses, consumers, and governments across the continent. The disruption of Russian gas supplies and increased reliance on liquefied natural gas (LNG) imports have placed further pressure on the market. As colder temperatures in Europe have depleted gas storage levels, the demand for LNG imports has pushed prices higher.

As a result, natural gas prices are expected to stay high even after the winter season. This trend is likely to continue as countries stock up on gas in preparation for next winter.

Looking ahead, natural gas prices are likely to remain high for the foreseeable future. In Europe, gas storage levels are lower than they’ve been in years, and with colder temperatures expected, demand will stay strong. In the U.S., prices may fluctuate depending on weather conditions, but the overall trend is still upward.

Given that natural gas is such a significant cost in the production of ammonia and urea, DEF prices will likely remain elevated. Fleet owners and operators may need to adjust their budgeting and operational strategies to manage these increased costs.

Looking for High-Quality DEF for your Fleet? Look no further!

Mansfield Energy understands the importance of protecting fleet assets. Today’s high-tech diesel engines are expensive. Using poor-quality, off-spec DEF can increase fuel consumption, equipment downtime, and maintenance expenses. Mansfield ensures customers always have a reliable supply of high-quality DEF that consistently meets ISO standards.

With our extensive network of DEF distribution partners combined with our own dedicated assets, Mansfield offers unmatched DEF logistics to ensure you always have the DEF you need. Contact us today!

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