What’s the Reason Natural Gas Prices are So Low?
Why are natural gas prices at historically low prices? According to gas pricing experts, you can sum it up in a single word: Marcellus.
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Coal Use Decreases, NatGas Increases – Renewables? Irrelevant
New numbers released by IHS CERA show how far coal has fallen as the fuel of choice to generate electricity in the U.S., and how high natural gas has risen to take its place. Here are some interesting statistics:
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New IEA 5-Year Report Says Natural Gas Future is Bright
In a new report released earlier today at the World Gas Conference in Maylasia, the International Energy Agency (IEA) paints a rosy five-year picture for natural gas around the world. You may recall that last week the IEA released their “golden rules” for shale gas drilling (see this MDN story).
The report released today says a quarter of new gas demand over the next five years will come from China, and that electrical generating plants in the U.S. will convert and use gas as much as coal. The IEA also advocates for a global market price for natural gas and hints that a spot price for gas in Asia may be on the way.
From the IEA press release:
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New Gas-Fired Electric Power Plant in Ohio
Another story about how electric generating plants are switching from coal to natural gas. This one comes from Ohio, where Appalachian Power brought a newly completed gas-fired plant in February near Dresden. Why switch from coal to gas? It’s all in the economics. The cost of coal has skyrocketed from $43.75 per ton in 2007 to $63.78 in 2011, an increase of 46 percent. At the same time, natural gas has gone from over $14 per million Btus to around $2.70 today. Need we say more?
But at what price is it more economical to use coal rather than natural gas? Thanks to Appalachian Power, we now know.
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PA Utility Announces Second NatGas Rate Cut This Year
On March 1, a little over two months ago, UGI Penn Natural Gas, a utility which serves approximately 158,000 customers in 13 counties in northeastern and central Pennsylvania, announced it was immediately reducing natural gas rates for its customers by 4.5 percent (see this MDN story). UGI announced yesterday it would file its annual rate on June 1 and it will request yet another 4.5 percent rate reduction on its annual rate which would take effect December 1. That’s a total of 9 percent in one year—thanks to the abundance of PA’s Marcellus Shale gas.
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Boone Pickens Sells Chesapeake Stock, Strange Comment on NatGas
Has T. Boone Pickens, Texas oil billionaire and author of “The Pickens Plan” that calls for America to use natural gas to reduce our dependency on OPEC oil and as a bridge to a renewable energy future, now turned his back on natural gas? His investment company, BP Capital Management, has sold off all of its Chesapeake Energy stock. Pickens’ comment on the reason for selling off Chesapeake was a tad strange:
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Chesapeake’s NatGas Production Cuts Never Materialized
In January 2012, Chesapeake Energy announced they would curtail (reduce) their natural gas production by 1/2 billion cubic feet (bcf) per day. In February, they announced they would double it to 1 bcf per day (see this MDN story). Other energy companies also announced they would cut production, all in an attempt to reduce supply and boost the price of natural gas. But commodities traders were wary of those announcements, saying in essence, “We’ve heard this before,” and that real cuts in production were never forthcoming (see this MDN story). Looks like the wary traders were right.
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Graph Showing NatGas Rig Count vs NatGas Price
In a Reuters news story about the Energy Information Administration’s (EIA) latest report showing natural gas production fell slightly in February, we get the following graphic which MDN found interesting. It shows the Baker Hughes rig count (number of natural gas drilling rigs) plotted as one line, with the second plotted line representing natural gas futures prices. The natural gas rig count—drilling rigs dedicated to drilling for natural gas in the lower 48 states—is now at a 10-year low. The count as of last Friday was 613, the lowest it’s been since April 2002. Gas prices are also at 10-year lows.
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NatGas Commodity Price Hits 10-Year Low, Facts & Figures
Yesterday the commodity price of natural gas hit a 10-year low, $1.984 per 1,000 cubic feet. There will be plenty of stories in the press about it. However, in one of those stories, we get this interesting and helpful information about the price, as well as the areas producing the most natural gas and the drillers producing it:Read More “NatGas Commodity Price Hits 10-Year Low, Facts & Figures”
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At What Commodity Price Does NatGas Drilling Stop?
How low might the commodity price of natural gas go before drillers really will quit drilling and wait for the price to go up? We’ll give you “the magic number” in a moment. But first, the (rather sketchy) rationale for how we calculate that number.It seems almost every day we hear in the mainstream news that the low commodity price of natural gas is forcing drillers to suspend or slow drilling operations—especially in the “dry gas” areas of the Marcellus Shale. Contrary to what “everyone” seems to be doing, Shell, Chevron and others have said they will continue drilling regardless of the low price of natural gas. And more than one analyst has said announcements of drilling cutbacks by Chesapeake and others is so much hot air and that they will believe it when they see it.
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Commodity Price | Hydraulic Fracturing | Industrywide Issues | New York | Pennsylvania | Statewide NY | Statewide PA | Steuben County
NY Customers See 50% Price Decrease from PA Marcellus Gas
Utility customers of Corning Natural Gas Corp. in New York State’s Finger Lakes region can thank their neighbors south of the border in Pennsylvania that they are now paying 50 percent less for their natural gas than they paid just one year ago. And they can also thank the energy companies who use hydraulic fracturing in the Marcellus Shale.
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Low NatGas Prices Translate to Electricity Rate Cut by Peco
Yet another Pennsylvania utility is lowering rates customers pay—this time it’s a rate cut for electricity by Peco Energy which supplies the Philadelphia area. Low cost natural gas is being used in electrical generating plants and the utility is passing along the lower cost to produce electricity to its customers, thanks in part to an abundant supply of Marcellus Shale natural gas.
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Pittsburgh Customers Get Another NatGas Rate Reduction
The Pittsburgh area’s three largest natural gas utilities have just dropped their natural gas rates (again) for customers—this time up to 22 percent.
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NatGas Commodity Price Hits a New 10-Year Low
The commodity price for natural gas in the U.S. hit a 10-year low yesterday after a government report of a larger-than-expected jump in supplies. There’s now more natural gas in storage than the entire country uses in a month.
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Number of NatGas Drilling Rigs Continues Slow Decline in PA
The number of gas drilling rigs continues a slow decline in Pennsylvania as companies reallocate those rigs to Ohio and to areas in the country where shale oil drilling is expanding.
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Range CEO Predicts Long-Term Commodity Price of NatGas
Here’s a prediction on the commodity price of natural gas from John Pinkerton, CEO of Range Resources, as delivered at the Wall Street Journal’s ECO:nomics conference this week:
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Yesterday the commodity price of natural gas hit a 10-year low, $1.984 per 1,000 cubic feet. There will be plenty of stories in the press about it. However, in one of those stories, we get this interesting and helpful information about the price, as well as the areas producing the most natural gas and the drillers producing it:
How low might the commodity price of natural gas go before drillers really will quit drilling and wait for the price to go up? We’ll give you “the magic number” in a moment. But first, the (rather sketchy) rationale for how we calculate that number.