Natural gas prices drop to lowest level in a decade

Eve Troeh Apr 12, 2012

David Brancaccio: When we complain about the price of gas, we mean, of course, gasoline — because it’s tough to complain about the price of natural gas these days, which has now dropped below $2 per thousand cubic feet, the lowest in a decade.

Marketplace’s Eve Troeh at our Sustainability Desk has been looking into this and joins us live. Good morning, Eve.

Eve Troeh: Good morning.

Brancaccio: Why is natural gas so cheap right now?

Troeh: One word — it’s a fun one to say: Fracking. This controversial method of fracturing rock to get at natural gas — you may have heard about it. Drilling companies have gotten so good at it that now we have a glut of natural gas. And while there’s talk of building systems to export it, or use it to run more cars, that’ll take years.

The best way to use what we have on hand is power plants. That’s what energy analyst Amber Mcullagh at Wood Mackenzie says.

Amber Mcullagh: Basically the gas price has to fall low enough to incentivize utilities to use gas instead of coal. That’s where demand can come from on an immediate basis.

Brancaccio: So natural gas instead of coal — but what does that do to the broader energy market?

Troeh: Well, as you said, it doesn’t do anything for gas prices at the pump. It can lower our electricity bills, since utilities can pretty easily switch back and forth from coal-fired power plants to natural gas ones. But these low prices may not stick, because the drilling companies are happy to slow down production; let the power companies eat up all this extra supply.

It’s just not worth the trouble, at these prices, to do the fracking. It’s a tough technology; lots of people want regulations on it. That would make fracking here more expensive. And as for that dream of exporting it — which would make American companies more money — it doesn’t look so hot as China and other parts of the world are learning how to do this fracking thing, too. They won’t need our natural gas.

Brancaccio: Marketplace’s Eve Troeh, thank you very much.

Troeh: You’re welcome.

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