This post will be one that evolves over time – especially if I can get some help from readers. My intention is to put together a representative series of quotes and links that show the rhythmic beat of the “cheap gas” mantra. I am not a believer – I think that the oil and gas industry is purposely engaging in a price war designed to drive out the competition. They have a war chest and plenty of cheerleaders, but the history of natural gas prices is anything but predictable.
Here are some starting quotes:
November 2, 2010 (Bloomberg.com) Nuclear Power Gains Clout in Republican House Election Victory, NRG Says
A renaissance in nuclear power may be stalled regardless of action by Congress, said Chris Gadomski, the lead analyst for nuclear power with Bloomberg New Energy Finance.
“I don’t think you can legislate new nuclear, especially in an environment when there is a lot of unconventional natural gas to be tapped and the cost of natural-gas generating facilities are about one 10th of nuclear,” Gadomski said.
November 1, 2010 (Nuclear Information and Resource Service (NIRS)) Letter to The Honorable Jeffrey Zients Acting Director and Deputy Director for Management Office of Management and Budget
All proposed reactor projects face the same challenging economic environment caused by unfavorable market conditions, including escalating estimated construction costs, decreased electricity demand, and low natural gas prices. More loan guarantees will not resolve these fundamental problems.
For example, Constellation’s recent rejection of a $7.5 billion loan guarantee for a new reactor at Calvert Cliffs indicates how poor the economics are for new reactors, especially merchant plants that must operate in competitive markets.
October 31, 2010 (CattleNetwork.com quoting the U. S. Energy Information Agency weekly report) Natural Gas Outlook: Abundant Supplies Making Headlines, Prices Lower
Working natural gas in storage increased to 3,754 Bcf as of Friday, October 22, according to Energy Information Administration’s Weekly Natural Gas Storage Report (see Storage Figure). The implied net injection for the report week was 71 Bcf higher than last year’s net injection of 24 Bcf and the 5-year (2005-2009) average injection of 45 Bcf. This marks the seventh week in a row that this year’s injections exceeded last year’s.
Significantly higher production this year compared to last combined with mild weather and relatively low heating demand has driven storage rapidly higher over the past month. Total storage is now just 1 Bcf below the level seen in 2009, a record-breaking year. Working gas inventories are 312 Bcf above the 5-year average level.
October 26, 2010 (Investing Daily) Exelon: A Nuclear Power Utility in the Bargain Bin
Regarding supply, no new nuclear power plants have been built in the United States since the 1970s, so Exelon’s 11 fully-licensed and operational nuclear power plants are precious commodities that give the company a virtually unassailable competitive advantage. Combine this limited supply with strong support from the Obama administration for nuclear energy, and Exelon is well positioned for the future.
Exelon’s Hedging of Energy Prices Has Pros and Cons
The only problem for Exelon is a short-term one: natural gas prices are cheap right now, which makes electricity prices generated from power plants using natural gas highly competitive with Exelon’s electricity prices. Whereas Exelon is best known for its electric utilities in Chicago and Philadelphia, most investors are surprised to learn that two-thirds of Exelon’s earnings come from the sale of unregulated power in competitive electricity markets, including the PJM Interconnection that serves the Mid-Atlantic states of Pennsylvania, New Jersey, and Maryland.
October 22, 2010 (Minneapolis Star-Tribune) Natural gas elbows its way to center stage
By unlocking decades’ worth of natural-gas deposits deep underground across the United States, drillers have ensured that natural gas will be cheap and plentiful for the foreseeable future. It’s a reversal from a few years ago that is transforming the energy industry.
The sudden abundance of natural gas has been a boon to homeowners who use it for heat and, manufacturers that use it to power factories, but it has upended ambitious growth plans of companies that produce power from wind, nuclear energy and coal.
Billions of dollars’ worth of plans to build wind farms and nuclear reactors have been delayed or scuttled, including Constellation Energy’s Calvert Cliffs nuclear project in Maryland.
October 11, 2010 (Businessweek) Ahead of the Bell: Constellation rising
The move, which was announced Saturday, will likely scrap the planned Calvert Cliffs 3 plant. Nuclear power plants, which take several years and billions of dollars to build, are too costly and high risk to qualify for typical bank loans. The company said in a statement that it no longer sees “a timely path” to reaching a loan agreement with the government.
Analysts had questioned whether it was a good idea to invest in a nuclear power plant at a time when natural gas is so cheap.
September 28, 2010 (Reuters) Fluor says cheap shale gas a hurdle for US nuclear
Fluor Corp (FLR.N), the largest publicly traded U.S. engineering company, said low natural gas prices resulting from a glut of shale production were holding back the development of U.S. nuclear power.
Extensive drilling in shale rock has unlocked a massive amount of U.S. natural gas, weighing down prices despite a bounce in other commodity prices in the past year.
Fluor Chief Executive Alan Boeckmann said on Tuesday that as long as there was no extra cost paid for carbon emissions in the United States, the economics of building plants to burn cheap natural gas would remain better than that of nuclear.