This week's warm weather is pushing spot natural gas prices below $4 to bargain basement levels. But what is happening with gas prices is much more fundamental than 60 degree temperatures during the middle of February in Pennsylvania and the Northeast.
Amazingly natural gas prices during 2010 and into 2011 are lower than in 2009. Prices have been typically $1 or more less than the same day 12 months ago.
Falling gas prices come in the face of a growing US economy and rising global oil prices, both of which would have driven up considerably natural gas prices in the recent past.
The American economy that saw GDP collapse in the 4th quarter of 2008 and into the first 2 quarters of 2009 is back from the brink and will have had 7 straight quarters of solid growth by April 1, 2011. Yet, despite real economic growth, natural gas prices continue downward.
Oil prices that plummeted from $147 per barrel in July 2008 to $30 per barrel by December 2008, as the world hurtled toward a depression, have steadily marched higher as global growth resumes. Brent oil prices have hit $100 per barrel. But natural gas prices go lower, as oil moves higher.
Natural gas prices have delinked from oil and economic growth. Amazing. And why?
Huge new supplies produced by shale drilling in the Marcellus and elsewhere have made the gas market a near total buyer's market.
The consumer benefits of the low gas prices show up in lower heating bills and in lower electricity prices. Increasing amounts of electricity are generated from natural gas, as gas displaces coal, and natural gas now provides 24% of America's electricity as well as heating 51% of the nation's homes.
The PJM wholesale electric market has seen prices decline about 50% in significant part as a result of lower gas prices as well as more renewable energy and greater energy efficiency by consumers.
Shale gas has changed the energy world and saved consumers billions.