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Natural Gas: Pricier Than You Might Think

By Eric McErlain
Here's Policy Pete on how the rising price of natural gas is affecting U.S. energy markets:
The US energy jones is about to start getting really nasty. The petroleum industry and the government, having totally misunderstood as recently as 2000 what was going to happen to the natural gas supply beginning now, are really panicked. Several dozen crash LNG projects are all on the fast track, being considered by good old FERC on a myopic case by case basis, and pretty soon a growing part of the natural gas 56 million American families use to cook their food and heat their residences will be brought in (at what threatens to be ungodly expense) from the same unstable regions that provide export oil. But unlike oil, where bidding up the price can resolve any short-term supply problems, natural gas dependency is fraught with danger.
For more on the dangers presented by overdependence on natural gas, click here for a speech our CEO, Skip Bowman, gave last April in San Antonio:
Since 1992, when the U.S. last enacted major energy policy legislation, the industry has built approximately 270,000 megawatts of new gas-fired generating capacity.

By contrast, only 14,000 megawatts of new nuclear and coal-fired capacity have entered service. That includes 4,355 megawatts of new nuclear capacity and 9,560 megawatts of new coal, all of it planned and under construction long before 1992.

Coal and nuclear energy together represent approximately 70 percent of U.S. electricity supply. They provide the highest degree of price stability, but investment in new nuclear and coal-fired power plants has virtually disappeared in the last 10 to 15 years.

Instead, we are placing unsustainable demands on natural gas supply, exposing consumers of natural gas and electricity from natural gas to punishing price volatility, and forcing large industrial users of natural gas to move jobs and production offshore because they cannot afford $6 gas as a feedstock.
This is a problem that won't be going away anytime soon.

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Comments

Engineer-Poet said…
Over at The Ergosphere, a poster cited an EIA report which projects huge increases in NG-fired electrical generation.

I think the cost of imported LNG is going to put the kibosh on that pronto.  It's also going to spur installation of wind farms, because nothing else can offset the need for electrical generation faster than a wind turbine.

Nuclear is long-term and fraught with political difficulties, but I'm sure we're going to have more of it.... eventually.  It may take considerable pain before people wake to the reality.
August 1, 2005 at 3:27 PM
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