Why Natural Gas Should Stay Cheap -- For a Long Time

Natural Gas Drops To Five-Month Low After U.S. Stockpile Report
Derick E. Hingle/Bloomberg via Getty Images
By Patti Domm

Natural gas prices are likely to stay low for at least the next 20 years, with a long term annual average price of $4 to $5 per million Btu, a new study says.

Even with new demand, the quantity of U.S. gas resources is so vast thanks to unconventional drilling techniques that average Henry Hub prices should not rise dramatically from the $4 to $5 range, though they could fluctuate. (Henry Hub, based in Louisiana, is the delivery point for physical natural gas traded in the Nymex futures market.) Henry Hub prices averaged $4.24 per million British thermal units in December, and hit a high above $13 per million Btu in October 2005.

"We now have knowledge and comfort that we have an incredible resource base-technically recoverable resources of 3,000 trillion cubic feet," said Rita Beale,
IHS senior director of power, gas, coal and renewables. "We have 900 tcfs of gas that can be recovered for $4 or less."

Natural gas futures were trading Friday at $4.34 per million Btu on the Nymex.

Beale said the projection is a long term average and that higher demand in some years could mean increased pressure on prices, like in 2015-2016, when a large number of coal-powered plants will shut down.

"There will be more gas in the power grid, and we'll have more chemical plants coming on line," she said in an interview. "We do think we'll have prices rising gently, not spike."

She also does not expect U.S. gas prices to rise to prices elsewhere in the world, once the U.S. begins exporting gas, expected to begin in 2019. Prices in Asia and elsewhere can be in double digits, and they are linked to oil prices.

The study says that challenges to natural gas use include conversion costs and regulations that can discourage economical natural gas projects.

The report also looks at the opportunity for natural gas in transportation, now in its infancy, and notes that never before has oil's dominance in vehicles been challenged by such low gas prices.

For instance, retail gasoline and diesel prices are expected to be double the cost of equivalent natural gas.

Thanks to cheaper supply from shale gas production, projects are already underway to convert to natural gas.


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11 Comments

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fakeconomics1

The demand and consumption for propane is very low as opposed to natural gas and why NBC News is reporting that there is short supplies and making it a big deal?

Is there any media outlet that don't have any motives?

January 21 2014 at 3:54 AM Report abuse +1 rate up rate down Reply
fakeconomics1

Here they are saying there is abundant natural gas and no demand for next 20 years or so. But NBC News now saying there is Propane Emergency in rural America??

NBC , CNBC, Fox Business and other media know how to create artificial demands and bubbles. Be aware of media creations.
Hey consumers!! Please do your home work and please do not depend on media outlets

January 21 2014 at 3:44 AM Report abuse +1 rate up rate down Reply
fakeconomics1

CNBC lost its credibility and respect a long time ago -----Cramer, Kudlow, Santelli, and other speculators on CNBC are self serving and they have their own motives to make false speculations and statements

January 20 2014 at 5:00 PM Report abuse +2 rate up rate down Reply
1 reply to fakeconomics1's comment
jimmy_branch

Cramer is so self righteous; his remarks bounce off his CNBC cubicle and come back to him as flattery.

And... the Greed...it's not enough to be a paid cheer leader of the Corporate and 1% world but he as to continuously author and pump his written gospel according to Wall Street.

January 20 2014 at 6:45 PM Report abuse +2 rate up rate down Reply
1 reply to jimmy_branch's comment
fakeconomics1

I agree --- I think Cramer and his subliminal ads on "Mad Money" are disgraceful. Yes--He is not serving consumers who has little money to invest and misleading them by false statements.

January 20 2014 at 7:09 PM Report abuse +1 rate up rate down
jimmy_branch

We need to cut the head off of the Wall Street Cheerleader and let the air out of their lies.

Die Cramer!

January 20 2014 at 3:54 PM Report abuse +2 rate up rate down Reply
jimmy_branch

Because Obummer is fueling the Nation with his Marijuana and Jim Pumper Cramer - the Wall Street Cheerleader is cheering him on.

January 20 2014 at 3:52 PM Report abuse rate up rate down Reply
k4jlp

It will stay low just long enough to SUCKER everyone into using it. THEN the Commodity Market Traitors will use every excuse under the sun to bid and jack it. JUST LIKE CRUDE/GASOLINE they will control the supply to control the PRICE. We are not stupid, we have seen it time and time again.

January 20 2014 at 6:24 AM Report abuse +4 rate up rate down Reply
1 reply to k4jlp's comment
dajt666

they did this in 2003. natural gas was always much cheaper. after oil exploded anything with the letters g, a and s (gas) in it's name saw prices explode upwards. then there is that releasing methane when drilling for natural gas. methane is how many times worse than carbon for the environment? isn't it like 40 times worse?

January 20 2014 at 11:00 AM Report abuse +1 rate up rate down Reply
1 reply to dajt666's comment
Help Us All

And don't forget folks, how devastating Fracking is to the environment - just leave it to our kids to sort it out, right?

January 21 2014 at 8:41 PM Report abuse rate up rate down
ga7smi

never happen

January 20 2014 at 12:45 AM Report abuse rate up rate down Reply
mily469

translation: huge price jump coming for a long time.

January 19 2014 at 11:28 AM Report abuse +2 rate up rate down Reply
skcarcomed_0

Somehole's a dope.

January 18 2014 at 3:01 PM Report abuse -6 rate up rate down Reply
skcarcomed_0

badsomey
That naughty naughty Obama

))))))))))))))))))))))))))))))))))))))))))

What an unemployed simpleton you are.

January 18 2014 at 3:01 PM Report abuse -6 rate up rate down Reply