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Page added on April 19, 2012
Natural Gas — True Game Changer
The precipitous decline of natural gas prices — to less than $2 per 1,000 cubic feet for the first time in a decade — promises to be a real game changer for U.S. manufacturing, and indeed the overall economy. The comparable price in Europe is $11 and in South Korea $14.
Of course, millions of homes, office buildings and retail outlets use natural gas — as do a growing number electric utilities and commercial vehicles. But the biggest immediate impact is on manufacturing which is heavily dependent on energy using 43 percent of our natural gas. It is a critical ingredient in several core industries — such as petrochemicals, steel, fertilizers, pulp and paper, petroleum refining, glass, plastic, and food processing.
The petrochemical industry is perhaps the best example of the advantage of the decline of natural gas prices. Petrochemicals use natural gas both for energy and as a primary raw material. The chemical ethylene, derived mainly from natural gas, is used to make a variety of products such as pool linings, building insulation and food packaging. Our European competitors rely mainly on oil for these products, putting them at a decided disadvantage.
Kevin Swift of The American Chemistry Council says the United States has a competitive advantage when oil is seven times as expensive as natural gas. Right now our natural gas price advantage is more like fifty to one.
The driving force in this most welcome development is the rapid development of shale gas through fracking technology, which has recently received more favorable reviews by the Environmental Protection Agency. Only a few years ago, experts were forecasting a gradual decline of U.S. natural gas resources. The National Association of Manufacturers, which I led at the time, was complaining that South Korea had more facilities for handling Liquefied Natural Gas (LNG) than the United States. So we started building more LNG terminals — which will now be used, not to import natural gas, but to export it. Just think of it — the United States becoming a major energy exporter to the world. It brings tears to my eyes.
Across the industrial landscape, a wide variety of commerce is busily switching to natural gas, and every increment means a more competitive economy, bigger profits and more jobs. But the most immediate impact on consumers is being felt in their heating bills which are lower than they have been in years, leaving them more disposable income that will help generate economic growth. Naturally, a growing number of consumers are switching from other fuels to natural gas to take advantage of the lower prices, a trend that can only accelerate in the months ahead. Likewise, lower gas prices offers proprietors of rental and commercial properties an opportunity for higher profits, and reduces the upward pressure on rental costs.
It is always dangerous to project economic trends far into the future, but I do not see this phenomenon subsiding anytime soon. The development of vast new resources of natural gas in our country will boost economic growth for many years to come.
10 Comments on "Natural Gas — True Game Changer"
BillT on Thu, 19th Apr 2012 2:05 am
BS! Counting trillions of cubic feet of gas before they are produced. I see legal cases and public opposition to the fraking etc that is used go get these gas bubbles. Yes, that is what is coming.
Kenz300 on Thu, 19th Apr 2012 4:07 am
Cheap energy is the life blood of the economy. The era of cheap oil is over. It remains to be scene if natural gas can take oils place in fueling the economy. Can the gas be produced safely? Are the estimates of the resource actually recoverable? Long haul truckers are converting to LNG.
Plantagenet on Thu, 19th Apr 2012 5:13 am
We are very lucky in the US that just as oil peaked, new technologies were developed that have resulted in a glut of natural gas.
Mike on Thu, 19th Apr 2012 7:19 am
I wonder what will happen to the supply and price of NG once all the economies of the world are running on it? Thats right the same thing happening with oil now.
BillT on Thu, 19th Apr 2012 8:00 am
The technologies have been there. It was just not profitable to use them, nor was it possible because of environmental restrictions. Now, it is going back into the courts and new regulations are coming. I would not bet the farm on natural gas saving or replacing anything.
Loren on Thu, 19th Apr 2012 11:29 am
There is no way that natural gas is profitable from a fracked well with sub $2 prices. It was irrational exuberance that will leave alot of invertors with empty pockets and reality will be the real “game changer”
DC on Thu, 19th Apr 2012 11:41 am
NG is farily useful fuel, too bad the oil-cartels flared off how many trillions of cubic meters over the last century(and shell still does in Nigera even tho its technically illegal even there). No one knows for sure, but flareing probably lost of decades of energy we could have used. But, the devil as they say in the details, and this detail is that NG production in N.A has alleady peaked, even in Canada. The United snakes is a net importer of NG. The so-called ‘glut’ does not mean we have oceans of NG waiting for us to set fire to them, it just means the frakers are pumping too much toxi-gas atm than the economy needs. You know..the long recession and all that?
A lot of people have no trouble grasping the concept of artifical shortages, ie I-junks, Playstations are a couple easy examples, but for some reason, seem to have trouble with idea of artifical gluts for w/e reason. Artifical gluts are the exact inverse of manufactured shortages, transient and temporary at best
Demand is down because the economy is too, and will likely stay that way, so the dreamers keep spinning tales of fabulous ‘gluts’ that exist only because of over-fraking. They then go on and tell anyone that will listen NG will power the world for centuries to come. Maybe it will, for the 5-10% of the population that are given access to it, maybe. Everyone else will be burning there particle board furniture and houses to keep warm.
Grover Lembeck on Thu, 19th Apr 2012 3:23 pm
We are flaring natural gas from oil wells in N. Dakota right now in this country, DC, I have seen them.
Fracking can’t possibly be profitable at $2 gas, so we will see a production slowdown until the price goes up ($8 is the price I see quoted most often).
We may also build ng export terminals, which would bring our prices in line with everyone else’s. I’m sure the energy companies are eyeing the export terminal route, but it takes a long time to build one, and the locals don’t want it, usually.
Rick on Thu, 19th Apr 2012 3:27 pm
Pure propaganda! —
“Just think of it — the United States becoming a major energy exporter to the world. It brings tears to my eyes.”
The way I see articles like these. They’re designed to keep the sheep ignorant of resource depletion. If Joe Public was truly aware of what’s happening, it would destroy the US / world economy. The 1% want to keep up the shame as long as they can. Even it means destroying the environment in the process. Though I doubt they care about the environment anyway.
Arthur on Fri, 20th Apr 2012 5:00 pm
I am not entirely convinced the intellectual giants at the HuffPo know the truth, but vilely want to hide it from the ‘sheeply’. Why should they want to?
It is more likely that auntie Arianne writes down what she likes to be true rather than what in all likelyhood IS true, namely that there is a sudden outburst of surplus gas as a consequence of new extraction techniques that cannot immediately be absorbed by the market. And already the US is the new Saudi-Arabia.
Sure Arianne. Open the champagne bottles!
As a reminder. In August 2008 oil prices reached a record high of 147$.
http://tinyurl.com/ydrdu54
One year later the oilprice had crashed towards 40$ levels.
Was there a new Ghawar oilfield discovered somewhere in Montana? Of course not. The economy merely had a near-death experience and demand for oil had crashed accordingly. 90 year old’s who just had a heart attack do not party. The new reality is one of high volatility of prices for fossil fuel. And that includes natural gas.