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Why are natural gas prices down?

Sam Eaton Aug 28, 2009
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Why are natural gas prices down?

Sam Eaton Aug 28, 2009
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TEXT OF STORY

Steve Chiotakis: The mood at a natural gas conference wrapping up in Houston today isn’t exactly upbeat. Natural gas prices recently took a dive to a seven-year low. Bad news for business, but what does it mean for consumers? From the Sustainability Desk, here’s Marketplace’s Sam Eaton.


Sam Eaton: Unlike oil, which the U.S. mostly gets from other countries, natural gas is a truly domestic fuel. Nearly 90 percent of the natural gas consumed here comes from U.S. wells. And thanks to improved technology, those wells are producing more gas than they ever have.

DAVID PURSELL: Right at the time when demand went away.

That’s Houston analyst David Pursell with Tudor, Pickering, Holt. He says the combination of the recession and a cool summer have gutted demand for natural gas. And since there are few options for storing the stuff, that oversupply continues to drive prices downward. Pursell says that doesn’t bode well for the future.

PURSELL: Low prices are a good thing. Really low prices are not. Because really low prices are not sustainable.

Meaning it’s harder for natural gas producers to turn a profit. Which means they’re less likely to drill new wells. And that, Pursell says, is a recipe for a spike in prices once demand picks back up again.

In Los Angeles, I’m Sam Eaton for Marketplace.

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