The U.S. Energy Information Administration is forecasting $3.53 for the average annual spot price for natural gas in 2012 (see chart above), which will be almost 12% lower than the average price this year of $4 per million BTUs. What are the six big results of $3.53 natural gas in 2012? According to energy expert John Hanger:
1. "Still lower natural gas bills for consumers, with a residential consumer saving probably another $45 on top of the $500 per year the gas price drop from 2008 has already provided.
2. Still lower electricity bills for those consumers in competitive electricity markets where natural gas pricing importantly impacts electricity prices. All other things being equal, another 50 cent decline in gas prices could reduce electricity bills by about 0.5 cents per kilowatt-hour and save electricity consumers about $50 during 2012. This $50 saving would be added to $500 per year in electricity costs that lower natural gas prices have already provided.
3. Lower natural gas bills and electricity bills will again prevent a broad energy shock, even though oil prices are at record levels for a full year and would go much higher if conflict with Iran erupts.
4. Another decline in the number of producing shallow, traditional gas wells in Pennsylvania will take place.
5. Gas will continue to displace coal in electricity generation. Power plants that can run on either coal or gas will use gas. More decisions will be made to convert coal plants to gas. Gas's electricity generation market share will rise and coal's fall to below 43%, into the 42% zone.
6. More natural gas displacing coal and oil will cut carbon emissions and other pollutants like soot and mercury. US carbon emissions will likely fall in 2012, in significant part due to natural gas.
John Hanger's Bottom Line: The 2012 pricing may well be the new floor on gas pricing. It is really hard to see how prices can go any lower, given that gas demand is rising, more drilling rigs are moving to oil, and prices are so low that more marginal wells are being shut in. EIA itself is forecasting an increase in gas prices for 2013 to $4.14, up but sill low.
Finally, perhaps another year of record gas supplies and establishing a new floor on gas prices will mean that the ridiculous smear that shale gas is a "Ponzi Scheme" and those that spread it will be ridiculed by one and all in 2012. I am not counting on that one, but another year of low, low natural gas prices looks almost guaranteed."
HT: Robert Kuehl
1. "Still lower natural gas bills for consumers, with a residential consumer saving probably another $45 on top of the $500 per year the gas price drop from 2008 has already provided.
2. Still lower electricity bills for those consumers in competitive electricity markets where natural gas pricing importantly impacts electricity prices. All other things being equal, another 50 cent decline in gas prices could reduce electricity bills by about 0.5 cents per kilowatt-hour and save electricity consumers about $50 during 2012. This $50 saving would be added to $500 per year in electricity costs that lower natural gas prices have already provided.
3. Lower natural gas bills and electricity bills will again prevent a broad energy shock, even though oil prices are at record levels for a full year and would go much higher if conflict with Iran erupts.
4. Another decline in the number of producing shallow, traditional gas wells in Pennsylvania will take place.
5. Gas will continue to displace coal in electricity generation. Power plants that can run on either coal or gas will use gas. More decisions will be made to convert coal plants to gas. Gas's electricity generation market share will rise and coal's fall to below 43%, into the 42% zone.
6. More natural gas displacing coal and oil will cut carbon emissions and other pollutants like soot and mercury. US carbon emissions will likely fall in 2012, in significant part due to natural gas.
John Hanger's Bottom Line: The 2012 pricing may well be the new floor on gas pricing. It is really hard to see how prices can go any lower, given that gas demand is rising, more drilling rigs are moving to oil, and prices are so low that more marginal wells are being shut in. EIA itself is forecasting an increase in gas prices for 2013 to $4.14, up but sill low.
Finally, perhaps another year of record gas supplies and establishing a new floor on gas prices will mean that the ridiculous smear that shale gas is a "Ponzi Scheme" and those that spread it will be ridiculed by one and all in 2012. I am not counting on that one, but another year of low, low natural gas prices looks almost guaranteed."
HT: Robert Kuehl
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Loading...
Posted In: MarketsNatural Gas
Benzinga simplifies the market for smarter investing
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
Join Now: Free!
Already a member?Sign in
