The Low Price of Natural Gas
Two very powerful forces have combined to artificially lower the price of natural gas to ridiculously low levels. Less than a year ago, the priced spiked up to a near all-time high, and now, has finished a quick and dramatic correction.
The first powerful force is a recession that has reduced manufacturing purchases of large quantities of natural gas. But that in itself is not the reason for such a sudden and dramatic drop. The other powerful force is the new PerfFRAC techniques used to extract natural gas from shale deposits as well as other non-conventional means. These two forces - lower demand and higher supply - are responsible for this blessing/curse of a low price.
Let us deal with why this low price will turn out to be the biggest curse of our lifetime.
Unlike oil, natural gas is an abundant form of fossil fuel that is available from the geography within USA borders. T. Boone Pickens, former wildcatter and famous oilman, has it pegged to say if our country wants to wean itself from foreign sources of oil; the only fuel that can be used for road shipping successfully, right now, is natural gas.
At current low pricing, semi-trucks and busses are going to be converted to operate on this fuel en mass.
The use of natural gas has also been growing as a feedstock for electrical generation. With the additional pressure of higher carbon emissions from coal-fired boilers, look forward to more natural gas being diverted to natural gas-fired generators.
Other, smaller forces at work will be converting oil-fired furnaces to natural gas, natural gas conversion to methanol for fuel cells, and industrial co-firing.
In all, these measures are going to increase demand in a big way.
This low price has also slowed exploration and drilling. North American Natural Gas rotary rig count is down significantly since July 2008. With such low market pricing there is little incentive to capitalize exploration and drilling ventures.
Dear reader, you should now have the complete picture. Increasing demand is going to meet declining supply resulting in a spike up in pricing never before experienced.
If things couldn’t get worse; is news that the new shale cracking technique may be resulting in increased earthquake activity. This alone could shut the whole shale-extracting natural gas process down.
But there is even worse news; the contamination of drinking water wells these new techniques are wholly responsible for. The choice is becoming clear, the use of renewable energy is much healthier than the extraction and wanton burning of natural gas (this paragraph was added March 2010).
However, there is good news. These low prices will result in lower utility bills. This is your chance of a lifetime. Use these savings to purchase a solar heater. Don’t wait before price of natural gas shoots to the moon, as surely, the cost to purchase and have a solar heating device installed will follow the price of natural gas upwards.
Posted summer 2009