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  • Here's why natural gas prices are so low

    Here's why natural gas prices are so low

    Explainer ┬╗Basic economics explains drop in cost.

    The Associated Press
    Updated: 08/26/2009 05:28:21 PM MDT

    Natural gas prices are at seven-year lows and it looks like heating bills may be cheap for a while.

    How did prices get so low, and how long are they likely to stay there? Are there ways we could be using natural gas -- beyond staying warm and cooking food -- to take advantage of this cheap source of energy?

    Here are some questions and answers about what is happening with natural gas prices.

    Q: Where are prices now and why have they fallen so much?

    A: Natural gas prices are down 80 percent from last summer, when prices spiked to nearly $14 per 1,000 cubic feet.

    The reason is Economics 101. Because of the recessions, there is little demand, and new drilling technology has made easy pickings of huge reserves of natural gas that was once out of reach.

    The Potential Gas Committee in Golden, Colo., reported in June that estimated U.S. reserves are 35 percent higher than just two years ago, thanks to new technologies. As a result, the industry-backed American Clean Skies Foundation said the U.S. has a 118-year supply of natural gas at 2007 production levels.

    The federal government expects consumption to decline by 2.6 percent this year, driven by a huge drop in demand from the nation's factories. At the same time, summer weather for much of the country has been mild, reducing the power plant-taxing use of air conditioning.

    Storage levels for gas headed into the heating season are at record levels
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    and gas has become so cheap that it has become competitive with coal for generating electricity from big power plants.

    Q: With prices so low, I should get a nice break on my heating bill this winter, right?

    A: Right, assuming you are in one of the 60 million homes heated by gas. Columbia Gas of Ohio, which adjusts prices monthly, says its prices for September will be about half of what they were in September 2008.

    Q: Given that there is an abundance of natural gas, why aren't we using it to power cars and everything else? Can't we become more energy independent?

    A: Natural gas is already used extensively. It heats our homes, makes our water hot and dries our clothes. It is used by industries that make, among other things, steel, plastics and chemicals, and utilities rely on gas to generate electricity.

    Some people would like to see natural gas used more extensively as a transportation fuel, beyond its limited uses by some public bus systems and corporate vehicle fleets. As of yet, the infrastructure does not exist for more widespread use.

    Airports and cities have built facilities where natural gas-powered buses can return for a recharge, and there are companies trying to build more natural gas stations for everyday use. If new climate regulations are enacted by the U.S., there may be an even stronger push for more such stations because natural gas produces nowhere near the emissions of gasoline.

  • #2
    Awash in natural gas, prices hit new 7-year lows

    us DOE can't deny it any longer. we must take advantage of this congress!


    Awash in natural gas, prices hit new 7-year lows
    Natural gas prices drop to 7-year low while oil prices rebound

    * By Chris Kahn, AP Energy Writer
    * On Thursday August 27, 2009, 4:04 pm EDT

    NEW YORK (AP) -- Natural gas prices slumped to their lowest level in seven years Thursday after the government reported that salt caverns, aquifers and other underground areas where it is stored are filling up.

    Levels of natural gas have been building because power-intense industries like manufacturing have cut back severely on production.

    Natural gas tumbled 6.7 cents to settle at $2.843 per 1,000 cubic feet. The price dropped as low as $2.692 per 1,000 cubic feet earlier in the day, a price not seen since Aug. 7, 2002. The contract is scheduled to end Thursday, however, and most of the trading already has switched to the October contract that gave up 4.6 cents to trade at $3.248.

    Meanwhile, crude and gasoline futures were tugged higher as equities markets rose and the dollar fell among other major currencies.

    Benchmark crude for October delivery added $1.06 to settle at $72.49 a barrel on the New York Mercantile Exchange.

    Still, oil prices have been tumbling since they touched $75 a barrel on Tuesday, and analysts said they expect it will fall further as the summer driving season ends in a few weeks.

    Retail gas prices peaked in late June at around $2.69 per gallon and have been falling slowly since, giving consumers a bit of a break in the tough economy.

    Gas prices gave up two-tenths of a penny to $2.62 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular gasoline is 11.5 cents more expensive than last month, but it's $1.047 cheaper than the same time last year.

    Oil remains above $70, largely because it is bought in the U.S. dollar. That means when the dollar falls, like it did Thursday, investors can get more crude for less money. Crude supplies grow this week, however, and they remain well above seasonal norms.

    "It's getting harder and harder to justify it at these prices," PFGBest analyst Phil Flynn said.

    Natural gas prices plunged early in the day when the Energy Information Administration reported that natural gas placed into storage surged again.

    There is so much natural gas in storage, it has begun to test the country's storage capacity. But EIA economist Jose Villar told The Associated Press that storage facilities have added about 100 billion cubic feet of extra space, giving suppliers more places to put it. The EIA will include details of the added capacity in a report to be published in the next few weeks, Villar said.

    In other Nymex trading, gasoline for September delivery increased 4.88 cents to settle at $2.0314 a gallon and heating oil added less than a penny to settle at $1.8592 a gallon. In London, Brent crude rose 86 cents to settle at $72.51.

    Associated Press Writers Carlo Piovano in London and Eileen Ng in Kuala Lumpur contributed to this report.

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    • #3
      Re: Here's why natural gas prices are so low

      I merged the two similar threads to keep one discussion on the topic.

      Comment


      • #4
        Re: Here's why natural gas prices are so low

        ...just heard a quick blurb on the morning news that Natural Gas is down 20% in just the last 6 trading days on the Nymex, gotta be good thing!

        Comment


        • #5
          Re: Here's why natural gas prices are so low

          It's so odd..
          Why is there an inverse relationship between natural gas market prices and what Mr. Picken's Clean Energy is charging us at his fueling stations??? Is the Pickens plan really bait and switch? When I bought my GX last fall, I think it was as low as 1.69--now what is it? 2.29 I think? That is a huge percentage increase.

          Comment


          • #6
            Re: Here's why natural gas prices are so low

            C. E. sets it's retail price at a slight discount to gasoline. A few C. E. stations have competition, and at those locations ,they break from the standard price model.

            Comment


            • #7
              Re: Here's why natural gas prices are so low

              Natural gas tumbles with most ever in storage
              Government reports US is storing more natural gas than ever; prices tumble more than 7 percent

              * By Chris Kahn, Associated Press Writer
              * On Thursday October 1, 2009, 3:03 pm EDT

              o
              Buzz up! 0
              o Print

              NEW YORK (AP) -- Natural gas prices tumbled Thursday after the government reported the U.S. is using so little that it has more in storage now than at any other time on record.

              Elsewhere, oil prices ticked higher as the dollar strengthened and traders mulled a mixed bag of economic reports that suggested the United States wouldn't enjoy a swift economic recovery.

              Benchmark crude for November delivery added 21 cents to settle at $70.82 on the Nymex.

              Natural gas for November delivery fell 34.7 cents, or 7.2 percent, to $4.494 per 1,000 cubic feet on the New York Mercantile Exchange.

              The Energy Information Administration reported Thursday that underground aquifers and caverns in the lower 48 states stored 3.589 trillion cubic feet of natural gas last week, topping the previous all-time high of 3.545 trillion cubic feet set on Nov. 2, 2007. Government records go back to 1975.

              Analyst Steven Schork said supplies have grown so much that the U.S. is nearing its storage capacity for natural gas. If that happens, producers could dump more of it on the open market, dropping prices even more.

              But Peter Beutel at Cameron Hanover said prices have dropped so low this summer that they'll likely spring back as winter approaches.

              Comment


              • #8
                Re: Here's why natural gas prices are so low

                Based on my travels this summer and following USA-wide prices (see cngprices.com) by Clean Energy (see my prior posts for aka of G/E), CE/GE appears to now have "minimum" $2.00 per gge regardless of underlying cost of commodity natural gas or competition. Denver, CO went from already high in summer of $1.95/gge and now is $2.00/gge. OKC airport (Will Rogers) went from introductory price of $0.99/gge then quickly to $1.34/gge then $1.89/gge and now at $1.99/gge. CE/GE also has $1.99/gge in Albuquerque, NM (see my prior posts on CE taking over Albuquerque).

                For California, appears that CE/GE has set their "minimum" at $2.50/gge. That's a whopping 25% higher than the $2.00/gge that Curtis is charging out in the boonies in Lancaster, CA !!

                Regular ole petrol gasoline just hit $2.19 here in midwest recently so growth of CNG looks grim if you only look at CE/GE pricing.

                Luckily, OnCue here in OK is selling at $1.23/gge and statewide Oklahoma Natural Gas is selling at $1.11/gge. Look at WI where they have sub $1/gge pricing and as always UT has sub $1/gge pricing.

                With commodity NG prices so low, it's all that more important to bring back strong Fuelmaker company and other competition to home VRA so that we individual CNG car owners can benefit from low NG costs.

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                • #9
                  Re: Here's why natural gas prices are so low

                  As stated, commodity prices have nothing to do with CE's pricing plans. It is strictly priced as a Gasoline minus a 'discount'. The only exceptions to this are where there is CNG competition (such as in Anaheim), where they are forced to run at a lower price to remain somewhat competitive.
                  1997 Factory Crown Victoria w/ extended tanks ~~ Clunkerized!
                  2000 Bi-Fuel Expedition --> ~~ Sold ~~ <--

                  Comment


                  • #10
                    Re: Here's why natural gas prices are so low

                    Hi midijeep,

                    Well,Natural gas prices are at seven-year lows and it looks like heating bills may be cheap for a while.

                    How did prices get so low, and how long are they likely to stay there? Are there ways we could be using natural gas -- beyond staying warm and cooking food -- to take advantage of this cheap source of energy?

                    Here are some questions and answers about what is happening with natural gas prices.

                    Q: Where are prices now and why have they fallen so much?

                    A: Natural gas prices are down 80 percent from last summer, when prices spiked to nearly $14 per 1,000 cubic feet.

                    The reason is Economics 101. Because of the recessions, there is little demand, and new drilling technology has made easy pickings of huge reserves of natural gas that was once out of reach.

                    Thanks

                    Comment


                    • #11
                      Damm well stated, Crazifuzzy!

                      Originally posted by CraziFuzzy View Post
                      As stated, commodity prices have nothing to do with CE's pricing plans. It is strictly priced as a Gasoline minus a 'discount'. The only exceptions to this are where there is CNG competition (such as in Anaheim), where they are forced to run at a lower price to remain somewhat competitive.
                      Yes, you are correct, CF...This is why no one in Minnesota drives a CNG...

                      Comment


                      • #12
                        Re: Here's why natural gas prices are so low

                        Much of reason for the low gas prices are the hundreds (maybe thousands) of Coal Bed Methane wells that have been drilled in the last few years. These wells are drilled into shallow wells that produce methane from coal beds. Because of the glut of natural gas right now, most of what is produced is pumped down into storage wells. Especially right now until winter hits. I work with companies that both produce from these wells and store the gas.

                        Also, there have been great new technologies for fracing wells in zones that were not previously economical to produce from.

                        Bob
                        Bob Baldwin
                        2009 Ford Focus Bi-Fuel
                        2000 Ford F-150 Bi-Fuel

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