Wednesday, February 27, 2013

Pennsylvania Made Gas Cheap For The Nation By Jumping Its Production From 1% to 9% Of US Gas Supply

In 2007, Pennsylvania produced about 1% of America's gas and natural gas prices were consistently around $8 for a thousand cubic feet and were on the way to $13 by July 2008.

By 2012, Pennsylvania was supplying 9% of America's gas, and the spot price averaged $2.73 for the year. Pennsylvania's production jumped to 2 trillion cubic feet in 2012 from about 200 billion cubic feet, and Pennsylvania played a key role in crashing the price of natural gas across America.

For the 51% of consumers who heat their homes with natural gas, cheap gas has saved them about $5 per thousand cubic feet or about $450 per year.  Cheap gas has also cut wholesale electricity prices by about 5 cents per kilowatt-hour and residential power bills by about $500, at least in states where retail consumers get the benefit of falling competitive wholesale power prices.

These consumer savings have been vital to poor families and important to families with the median income of about $49,000 per year.  The extra disposable income created by falling heating and lighting bills cumulatively stimulated the national economy and helped it to maintain slow economic growth, and avoid a double dip recession, in 2011 and 2012.

Cheap gas has also led to a large shift from coal-fired production to natural gas, with coal's generation market share falling from 48% in 2008 to 37% in 2012, while gas increased to 30% of the nation's electricity. The shift to gas slashed toxic air pollution by 19% just in 2010 and contributed substantially to reducing US energy related carbon emissions to 1995 levels.

Cheap gas is the result of increased gas supply, and Pennsylvania led the nation in increasing its share of the national gas supply, jumping from 1% to 9% of America's gas. No state did more than Pennsylvania to crash the gas price. That cheap gas benefits consumers, the economy, and has displaced large amounts of coal and oil that would have otherwise been burnt over the last 5 years.

The enormous benefits delivered to America by Pennsylvania's gas production makes even more painful Governor Corbett's refusal to impose a reasonable drilling tax and to take seriously complaints about gas drilling.  Both are huge blunders that must be corrected.


  1. John,

    Excellent points. If you don't mind me asking, what sort of severance tax do you propose? If you were to enact one, would you rescind the current impact fee. Please be gentle.

  2. The tax should be in the middle between highest (North Dakota) and lowest (Arkansas). We should discuss the structure. Does the tax vary with market price or not? A portion of the revenue must go to local communities. Most of the rest should go to public education.