Economics of Natural Gas

Wow! NYMEX Gas dipped below $3/MMBTU last week. Here's brief article from the Economist discussing the current trends in natural gas (LINK to "The economics of natural gas - Drowning in it").

Here's the EIA chart on gas storage. This graph shows that current storage is above the history maximum (click to expand image).

Prices below $4/MMBTU and maxed out storage will tend to shut in some wells (deferred production) and slowdown exploration and development of new fields. Long term cheap gas will drive more electricity producers to gas vs. coal.

Of course the gas market is too complex to draw a conclusion about the future of the Alaska Gas Pipeline from a single data point in late August. New demand will come on line and old demand will come back as the recession eases.

Key an eye on crude as the price tops $70/bbl. Tar Sand crude still looks like the future and arctic gas will supply the energy to produce it.