Shepstone Management Company, Inc.
It just doesn’t get much better for natural gas consumers, as an Energy Information Administration post tells us. It’s one huge win after another.
The Energy Information Administration (EIA) is out with an excellent post today that reveals just how much winning natural gas consumers are experiencing. The post is titled “Natural Gas Prices in 2019 Were the Lowest in the Past Three Years” is all about production, prices and versatility in the way natural gas consumers are able to share in the benefits.
Here is the chart that tells everything:
Natural gas consumers in the U.S. have enjoyed a decade of consistently low prices delivered by the shale revolution. The rest of the world has also gained, except perhaps for the Mid-East and Russia, who can no longer bully oil and natural gas consumers. Consider, also, these points from the EIA article:
- Lower natural gas prices in 2019 supported higher consumption—particularly in the electric generation sector—and higher natural gas exports. Continued growth in domestic production of natural gas also supported prices for natural gas consumers throughout the year.
- In the Northeast, additional imports of liquefied natural gas (LNG) into New England limited price spikes during the winter of 2018–19. Despite a cold snap in the Midwest in February 2019, natural gas prices at Chicago Citygate were lower than during previous extreme weather events.
- Natural gas consumption in the residential and commercial sectors increased by 2% in 2019 compared with 2018, based on the U.S. Energy Information Administration’s (EIA) monthly data through October and estimates for November and December.
- Natural gas use in the electric generation sector also increased in 2019, particularly in July and August when a heat wave in the Midwest and the Northeast led to record-high generation by natural gas-fired power plants.
- Lower summer natural gas prices, which averaged $2.33/MMBtu in June through August (the lowest summer average Henry Hub natural gas price since 1998), have supported higher natural gas-fired generation in the summer months.
- Dry natural gas production has grown every year since 2016. Production increased by 7.5 billion cubic feet per day (Bcf/d) (9%) through the first 10 months of the year after record growth in 2018. Sustained growth in natural gas production put downward pressure on prices, which continued to decline for most of 2019.
- Most new pipelines placed in service in 2019 were located in the South Central and Northeast regions. These pipelines provide additional takeaway capacity out of the Permian and Appalachian supply basins and will serve growing demand for LNG exports, pipeline exports to Mexico, and U.S. natural gas-fired power generation.
- U.S. LNG exports set a new record in 2019, averaging an estimated 5.0 Bcf/d (69% higher than in 2018) as the United States became the third-largest global LNG exporter.
Why are exports important to U.S. natural gas consumers? Well, there are three reasons:
- Extending the benefits of the shale revolution to other natural gas consumers around the world, particularly allies, only strengthens the world economy and burnishes our own energy security.
- Exports of natural gas support the natural gas industry and allow production to continue at the economies of scale that deliver consistently low prices.
- Exports bring new cash and investment to America, which redound to the enormous benefit to the economies of rural areas in Pennsylvania and Texas, for example, where the drilling takes place.
Natural gas consumers are repeat winners, even in places such as Massachusetts that don’t want pipelines but will take LNG. The trick is to make sure it’s American and not Russian LNG, but that will happen in time and more pipelines will be built because they must be built. There is no substitute for natural gas and natural gas consumers are benefiting by lower prices, greater energy security, stronger economies and future opportunities to grow business and put more money in the pockets of those same consumers.