Natural Gas production in USA
Why and how is North American natural gas production not plummeting in this low price environment? I and other folks at Platts and Bentek Energy spend a considerable amount of time trying to find a half-decent answer to this question.
Commodities are well known to go through cycles with booms and busts. As commodities go through these sequences, media outlets clamor and fret about how low or high prices could go.
As many commodities are down at the moment, it is sometimes difficult to explain that one is down more than others and why it stands out from the pack.
The graph below, brought to my attention by Richard Meyer, at the American Gas Association, gives a great visual example of how natural gas has done compared to other commodities since 2005. The data is compiled using IMF primary commodity prices.
Despite a brief rise in prices in 2008, natural gas prices have been depressed compared to other commodities.
On August 18, 2008, the national average price for next-day gas was $7.52/MMBtu. Exactly a year later, in 2009, in the doldrums of the financial crisis, the next-day average price was $3.12/MMBtu. The national average for next-day gas on August 18, 2015, was $2.67/MMBtu. Yes, the price of natural gas is lower today than during one of the nation’s largest economic downturns.
In 2009, US natural gas production averaged 58.7 Bcf/d. At this time, Platts unit Bentek displayed US production by region. Take notice of where gas was being produced just six years ago at the end of 2009.
In 2015, US natural gas production has averaged 72.2 Bcf/d. Take a look at where gas is being produced today. The growth in production has almost completely come from the Northeast.
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