I keep hearing people talk about how much new natural gas supply horizontal drilling and hydraulic fracturing has provided to the US energy market. They keep telling me that is the reason that US gas prices have stubbornly remained at levels about 1/6th to 1/3 the levels in Europe, Japan and India.
The ads – often disguised as a political speech – say that this new technology is what allows gas producers to promise that they can replace the output from coal plants that are being forced to shutdown. Those coal plant shutdowns, by the way, are often as a result of focused political activity by gas producers like Chesapeake Energy. The marketers also claim that this technology enabled production is what allows utilities to decide they do not need to work very hard to build new nuclear power plants.
When I get confused by marketing pitches, I look for sources of real data to try to gain insights and understanding. Here is a graph from the US Energy Information Agency that shows “gross withdrawals” from US natural gas wells during the period from 1973-2012. Can anyone show me the huge increase in production?
Low prices natural gas prices in the US are largely an artifact of an economic recession that coincided with a couple of relatively mild winters that combined to reduce demand. Those low prices will not last because there are many factors building up to increase demand at the same time that increases in supply are dropping; most drillers and their backers are not happy about sustained low prices. Please understand that the total above ground inventory of natural gas is roughly equal to ONE month of demand.
Gas is not energy dense and it is explosive. It is not safe to keep much of it around; that is why natural gas prices tend to be quite variable over short periods of time.