Marcellus Shale Gas Leads to Lower Prices for PA Consumers

falling pricesOne of the arguments in favor of shale gas drilling is that it will create more supply leading to lower prices for consumers (that’s Economics 101 for the Occupy economic illiterates). Those opposed to drilling scoff and say it won’t happen, that the big, bad energy companies will rig the system to keep prices, and profits, high. Here’s a dose of reality for those who scoff:

Natural-gas drilling in the Marcellus Shale might have stirred controversy, but National Fuel Gas Distribution Corp. said it’s also led to a larger supply and lower prices.

The utility, which serves 14 counties in northwestern Pennsylvania, announced Monday that it is passing along to customers an 8.2 percent decline in the price of natural gas.

An average customer on balanced billing — using 95,000 cubic feet of gas a year — would see his or her monthly bill fall from $92.51 to $84.92.

"This decrease is the direct result of a continuing decline in the market price of natural gas, largely due to the increased supply, particularly from the Marcellus Shale development," Nancy Taylor, a company spokeswoman, said in a statement.

The most striking evidence of the price decline can be found in comparing the current price of $9.56 per thousand cubic feet to the peak price of $19.71 that was announced Aug. 1, 2008.

The abundance of gas found in the Marcellus Shale, much of it in Pennsylvania, has been a big factor in that decline, Taylor said.*

*The Erie Times-News (Nov 1, 2011) – Natural-gas prices fall 8.2 percent in Erie region

  • Anonymous

    First, there is a price floor that must not be breached in order for gas companies to at least break even. Not sure what it is, but without it, gas companies will go out of business. Second, permits are being issued for gas facilities to change over to LNG (CH4)  temporarily to a liquid form for ease of storage or transport for export, to emerging foreign markets. While there is a glut in the US of NG, thanks to the new technology, it is that technology that has driven the price down. Supply and demand in the US is forcing the gas companies to ramp up their export side and NG thirsty countries will take all we can pump out. This also raises some questions on any 100 year supply. Some studies of the two largest shale gas reserves over the last 5 years have shown a substantial discrepancy between what the gas companies and the USGS estimate and real decline numbers. We are talking about two different assessments too……..technically recoverable and economically recoverable product. At today’s NG prices, the math does not work for the economical part of this equation.

  • Anonymous

    Oh my, an 8.2% decrease??? Now we can all afford that second home and personal yacht we’ve been saving for. Please, Natural Gas Industry, shower us in more of your good graces!

  • Jim Willis

    When was the last time *anything* decreased in price for you Sam? Your cable bill, electricity rates, price at the pump…they all *only* go up, never down. So yeah, this is a really big deal, with more on the way. How would paying the equivalent of $1.50 per gallon for gas (if it were natural gas) grab you Sam? Enough of a savings there to make a difference?

    What’s frustrating is that even when faced with cold, hard evidence, you antis still can’t bring yourselves to admit natural gas is the right resource at the right time. Sad, really.

  • Anonymous

    Jim, don’t get me wrong, I do appreciate the modest drop in price. And you are right, that utilities never seem to drop even in the best of times. I was simply making a facetious comment on a story that applauds an industry based upon a drop in energy prices that amounts to less than my Sunday newspaper subscription.

    If we truly see the equivalent of $1.50/gal gasoline then I will be right there with you, but I am afraid I have heard one too many corporate promises go unfulfilled. If that makes me a scoff-er, so be it, and I look forward to only being proven wrong.

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