Wednesday, March 02, 2011

U.S. Is Inundated With Natural Gas, Record Output in 2010, Residential Prices Fall to 7 Year Low

According to data just released by the EIA, natural gas production in the U.S. reached an annual record high of 26.85 trillion cubic feet in 2010.  That output was an increase of 3.22% above the previous record high last year, which pushed U.S. production in 2009 above Russia's, and made the U.S. the #1 producer of natural gas in the world.  

On a monthly basis, natural gas production in December surged to 2.386 trillion cubic feet, which was almost 9% above the year-ago level, and set a new all-time record for the most gas ever produced in a single month (see chart below):

The record high level of production in 2o1o and record monthly output in December helped drive the average residential gas price for the month of December down to $9.86 per 1,000 cubic feet, the lowest monthly average since February 2004, almost 7 years ago (data here), see graph below:   

"The U.S. is inundated in natural gas, and the glut may not ease any time soon. Domestic production last year hit its highest level in almost 40 years, and 2011 will likely see another year of strong production. That means another year of subdued electricity prices and pressure on drillers' bottom lines as well as a powerful incentive for companies and other consumers to switch to the heating fuel.

With no way to export large quantities of gas and a drilling boom fueled by easy availability of credit and widespread international interest in U.S. gas assets, the glut is seen continuing through 2011.

"Rising production will once again overwhelm demand, leading to yet another year of low prices," Credit Suisse analyst Stefan Revielle said in a research note.

In its latest outlook, the EIA saw U.S. production increasing by 0.8% this year, while deliveries to consumers are expected to rise by 0.3%. For consumers, that means cheaper electricity prices and inexpensive gas for heating and cooking in homes and businesses."

MP: At the same time that oil and gasoline prices in the U.S. are surging due to political unrest in the Middle East, prices for residential natural gas in the U.S. are falling to 7-year lows. Maybe one of the lessons here is that by opening up our domestic energy reserves to drilling for natural gas and oil, we get the multiple benefits of: a) reduced dependence on foreign oil, b) less exposure to what will likely be ongoing turmoil in the oil-rich Middle East, and c) lower energy prices.  


At 3/02/2011 11:38 PM, Blogger Benjamin Cole said...

The boom in natural gas production is a tribute to the private sector and innovative spirit, and the willingness to risk capital prudently.

It is also suggests we do not need a lard-laden, ossified foreign-military establishment that can run up bills by the trillions of dollars to protect Mideast dictatorships--we have plenty of energy right here at home, if we just use it.

Natural gas easily powers trucks and cars, either by CNG, or by conversion to methanol. Some are talking about processes to convert natural gas directly to gasoline. The future is very bright--but only if let the private sector do what it does best, create wealth.

Even now, producers are becoming more and more expert at shale gas production, thus driving down costs.

Globally, natural gas will be glutted out for years. There is shale elsewhere, while conventional fields are being found anew as well.

BTW, cars are easily converted to CNG, and there is a dealer in Oklahoma doing just that. You can buy a CNG car/truck off the lot for under $10k. See I have no connection to this dealer.

Now that is innovation!

BTW, CNG stations are pooping up around Los Angeles. I could actually commute now by CNG. With the advent of the Internet, it is easy to scope out CNG stations--making longer drives easier. The changeover to CNG could be done rather easily and quickly.

At 3/03/2011 5:40 AM, Blogger rjs said...

When the believers stop believing: Chesapeake dumps shale gas assets

At 3/03/2011 11:53 AM, Blogger Che is dead said...

When the believers stop believing: Chesapeake dumps shale gas assets

"Fast forward to today. So poor is the natural gas business now that McClendon has decided to sell off a good portion of Chesapeake's shale gas assets in order to concentrate on oil trapped in shale. Why? Because the price of oil is so much higher relative to natural gas, proving that price is the key driver in exploiting hard-to-get hydrocarbon resources."

Yeah, yeah, yeah. Back in the '90's when oil was trading at $8 a barrel and hundreds of drilling firms were going out of business we heard the same thing.

Lower pricing will spur greater usage and demand. Many countries are in the process of building the infrastructure to handle LNG. When the economy recovers and that infrastructure is in place prices will stabilize and then rise. It's important not to confuse short term price volatility with long term viability.

It's easy to see where the author of this article is coming from when he writes: "What America and the world needs now are new steady, dependable and climate-friendly sources of energy, sources as steady as the rays of the sun and as clean as the wind on plains."

Talk about "believers".

At 3/03/2011 1:04 PM, Blogger NormanB said...

Someone please explain why Obama did not mention the explosion in energy reserves found IN THE USA in his State of the Union speech. Instead he wants to waste money on Green (inefficient) energy.

Honda has a natural gas powered car so we know how to do that. Surely, its easier to build NG cars and service stations which is only an easily accomplished engineering and construction problem vs te very diffcult physics problem of getting energy stored in a battery vs the weight of that battery enough to make battery powered cars feasable.

I feel like we are in a Twilight Zone.


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