Wednesday, October 19, 2011

January Gas Prices Hit Lowest Levels Since 2002

I cannot resist snark. The shale gas "Ponzi scheme" keeps producing huge new supplies and lower gas prices.  Yesterday the January forward natural gas contract for the mid-October date hit the lowest level since 2002, according to the Wall Street Journal.

Back in 2002 shale gas amounted to about 1% of US gas supplies. From 2002 to 2008, prices marched higher, gas imports increased, and the nation prepared to import large volumes of LNG, believing that domestic natural gas supplies were inadequate to meet demand.

Providing 30% of US gas supply, shale gas has changed all that, including $10 or more for a thousand cubic feet.  Thanks to shale gas, this winter will feature low natural gas prices for the 51% of American homes that use natural gas. 

Just look at the prices heating oil customers will pay this winter to see the importance of low natural gas prices.   EIA is projecting that heating oil consumers will pay as much as $3.71 per gallon or $3,000 to $4,000 to get through the winter.  Perhaps oil customers need to be served by a Ponzi Scheme.


  1. John,
    there might be a lot of significance if the numbers for total fuel oil costs turn out to be true. Perhaps the current direct economic cost of using fuel oil will create more public awareness as to the benefits of expanding the use of Natural Gas. If this happens then the health costs which result from the use of fuel oil will decrease.

    This economic cost effects individuals, but also commercial,industrial and power generation users of fuel oil. If the Bentek presentation Carbon Black posted in reply to your entry "US Oil Drilling Reaches Record Levels" on September 1'st is accurate as to the potential for fuel oil conversions, the Northeast region has the potential to increase the demand for Natural Gas by 3.28 Bcf/d. see slide #14

  2. So far I haven't seen any decreases in my home gas rates, although I did see an interesting article in Bloomberg Business Week a month or so ago that stated that because of the shale gas drilling across the U.S. there is now a glut of natural gas on the market. This being the case, the gas industry was exporting the gas with the goal of driving up domestic prices.

    Can you comment on this?

  3. Your gas bill has many parts. The delivery or distribution charge has likely gone up. The tax portion has stayed the same. Then there is the commodity or gas portion. Different gas utilities buy gas in different ways. But the cost of gas was generally in the $6 to $8 for a thousand cubic feet range from 2004 to 2008 when it spiked up to $13 in July 2008. Gas in a winter month could hit $10 and did hit $16 after Katrina whick knocked out a lot of Gulf of Mexico production. It recently has been around $4 or less, including for the January contract. If you were paying July 2008 prices, you could add up to about $8 per mcf to your gas bill. Shale gas is the reason you are not. Take away shale gas and you would be pretty quickly.

  4. Also, many gas utilities have issued press releases over the last few days indicating that prices for the coming winter will be either flat or lower than last winter depending on whether or not they hedge prices through a risk management program.

    One clarification: there is no current, permitted capability to export gas from the lower 48. Some applications have been made, but based on other permitting requirements, capital allocation processes, etc., the earliest this could happen is 2015.

  5. America has not LNG export capability, but it does have pipelines to Canada and Mexico. America has exported gas through those pipelines for a long time. We were doing so even when our gas imports were rising.

  6. Yes, John. Sorry - good clarification, as I was referring to LNG.