Natural gas use high, price remains low

Here, a natural gas powered electricity generating plant in Middletown, Conn. U.S. utility companies are burning a record amount of natural gas.

Kai Ryssdal: The Obama administration is back on the energy issue again. Out in Utah today, the Secretary of the Interior approved a plan that'll let Anadarko Petroleum drill as many as 3,600 new natural gas wells.

Now if you've been following natural gas prices, you know where I'm goin' here. What's up with drilling for new supplies when prices are already so low and potentially unprofitable?

From the Marketplace Sustainability Desk, Scott Tong reports.

Scott Tong: It’s the second time in a week the Obama administration has gushed about promoting natural gas drilling. Meanwhile, oil and gas lobbyists regularly blast the administration for obstruction -- regulating, delaying and taxing energy production.

So who’s right? Maybe nobody.

Philip Verleger: This is almost entirely a technology story. Good old fashioned American entrepreneurialism.

Independent energy economist Philip Verleger says policy-schmolicy.

Verleger: Neither this administration nor any other administration has really done much at all other than make available land.

Verleger sees the U.S. gas story as a tectonic shift in global energy; production has surged 53 percent in seven years. So now we have a glut, and bargain basement prices.

Some companies are losing money, but Verleger says others are still drilling, because they locked in high prices -- through financial markets, and hedging.

Verleger: Wall Street needs to take a victory lap, since they keep getting criticized for everything they did in the housing market and everything. This is a true American success story.

And power plants are binge-buying -- they burned 34 percent more gas than a year ago.

Industry consultant John Hanger.

John Hanger: It’s almost been a one-for-one displacement of coal by natural gas over the last decade.

You’d think all this would push up prices, but energy investors keeping getting burned. There’s so much natural gas out there.

Hanger thinks prices will double in a few years, but immediately pulls out the disclaimer: spend enough time in the energy business, he says, and you’re going to be wrong pretty quickly.

In Washington, I’m Scott Tong for Marketplace.

About the author

Scott Tong is a correspondent for Marketplace’s sustainability desk, with a focus on energy, environment, resources, climate, supply chain and the global economy.
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I've heard several stories in the past few months about natural gas with the main theme being they're finding lots of it and the prices are very low. It seems that natural gas could have a huge impact on the energy situation in the states. These stories and your story of today left me wanting more. You said that the natural gas is replacing coal; how much of the coal usage is that replacing? How big of an impact will that have on the environment (CO2 emissions)? Will natural gas be replacing oil usage? If so, how much and when (how will that impact oil imports)? How does the current price of natural gas compare to current prices for coal and oil? How will natural gas impact electricity costs? Are there big opportunities for natural gas fueled cars (I know some fleets use some form of natural gas for fuel)?

I hope you'll be doing follow-up stories to answer these questions. Thanks!

Oh I forgot to ask; Is this your idea of "sustainability"?

The corporate serving rhetoric of "good old -fashioned entrpeneurialism" begged many crucial questions, omitted on "public" radio. Who benefits from the administration;s giveaway to the industry? Why wasn't that asked of "independent" energy economist,Philip Verleger? Why were fracking issues or other environmental impacts not raised not raised by Scott Tong? Yes, this may well be a victory lap for Wall St. but at the expense of the American people and the environment. But I guess Tong, Verleger , and the whole crew of Marketplace were too engulfed in this "true American success story" to conduct the kind of critical independent inquiry that's touted at every fundraiser.

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