In a recent speech, Obama mocked the "drill, drill, drill" strategy, and called it a "bumper sticker," not a real solution to high prices at the pump. Well, the drill, drill, drill strategy seems to be having quite an effect on residential natural gas prices, which just fell to an inflation-adjusted ten-year low in December, according to new data from the EIA
(see chart above, adjusted for inflation using the CPI). At $9.69 per thousand cubic feet in December, residential customers were paying the lowest inflation-adjusted price since March 2002, almost ten years ago, when the price was $9.09. As recently as the summer of 2008, prices peaked above $20, at more than twice the current level.
Why are residential gas prices the lowest in a decade? As I pointed out yesterday, natural gas production peaked in December at the highest monthly production level in U.S. history, see chart and post here
, and it's the abundance of shale gas being produced at record high levels that is bringing prices down to record low levels. In other words, it's just simple, basic economics of supply and demand. Drill, drill, drill = increased supply, supply, supply = low, low, low prices.