The price of natural gas is plummeting at a pace that has caught even the experts off guard. Cheap natural gas is mainly a good thing for families and the economy.
A 35 percent collapse in the futures price over the past year has been a boon to homeowners who use natural gas for heat and appliances and to manufacturers who power their factories and make chemicals and materials with it.
The country is flush with natural gas as a result of new drilling techniques that have enabled energy companies to tap vast supplies that were out of reach not so long ago. The country’s natural gas surplus has been growing even as the country burns record amounts.
This winter’s warm weather slowed the growth in demand, however, and created a glut. In the Northeast, December was the fourth warmest in the last 117 years. Winter supplies are 17 percent above their five-year average.
The natural gas futures price fell 13 percent last week, to $2.67 per 1,000 cubic feet. That’s the lowest winter-time level in a decade.
“The market has been overwhelmed with gas,” says Anthony Yuen, a commodities analyst at Citibank.
He and other analysts expect the price to average near $3 for all of 2012. If the weather stays mild, the price could even dip below $2, a level not seen since 2002.
Cheap natural gas is mainly a good thing for the economy:
— More than half of U.S. households use natural gas for heat, and a quarter of the nation’s electricity is made from it. Falling heating and electric costs are offsetting the impact of high gasoline prices and enabling families and small businesses to spend on other things. Residential gas and electric customers are saving roughly $200 a year, according to a study by Navigant Consulting.
— For companies that make plastics, fertilizer and other chemicals derived from natural gas, the falling prices are nothing short of a windfall. The same goes for makers of products from steel to bricks to beer. All use a lot of natural gas to heat their furnaces. U.S. manufacturers are becoming more competitive globally as a result of the country’s cheap natural gas, industry officials say.
Some industries aren’t cheering, though.
With electricity prices falling, the profits of all electric power producers — whether they rely on coal, nuclear or wind — are shrinking.