Natural gas use high, price remains low

Scott Tong May 8, 2012

Natural gas use high, price remains low

Scott Tong May 8, 2012

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.

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