Thu October 17, 2013
U.S. Is The World's Largest Producer Of Natural Gas. Here's What That Means
Originally published on Fri October 18, 2013 11:37 pm
Natural gas production in the U.S. is going through the roof. The U.S. now produces more natural gas than any country on Earth, according to a recent report from the U.S. Energy Information Administration.
This is largely due to fracking, the controversial method for using pressurized fluids to break up rocks to get at the natural gas below. (Here are stories on the environmental debate over fracking.) Over the past few years, fracking has had a huge effect on energy in America. Here's how.
1. Natural gas has gotten really cheap in the U.S., but your gas bill isn't much lower than it used to be.
With other commodities (we're looking at you, oil), there's one price all around the world, so an increase in U.S. supply doesn't tend to change global prices much. But gas is different: Unlike oil and other commodities, natural gas is expensive and difficult to export. So the price varies widely from place to place. And as the U.S. has produced more and more gas, the price has gone way, way down.
A big chunk of your gas bill is the cost of building and maintaining pipes. Those costs don't go down when natural gas prices fall, so the prices consumers pay for gas haven't fallen nearly as much as the wholesale price for gas.
2. The U.S. is burning less coal.
Power plants burn a variety of fuels to produce electricity. As gas has gotten cheaper, it has been an increasingly popular fuel source for generating electricity, and the use of coal has been declining.
3. New factories are springing up to take advantage of cheap gas.
Some industries make stuff out of natural gas. As natural gas production expands, companies are building new factories in the U.S. to cash in on the lower prices. A South African chemical company, Sasol, plans to invest billions in Louisiana for plastic factories, The Wall Street Journal reports. It joins the ranks of Mitsui, Dow Chemicals and Exxon Mobil, which have all announced huge investment projects to use the cheap natural gas for their projects.
4. The U.S. may not be the world's biggest producer of natural gas for long.
The U.S. was among the countries where drillers started going after shale gas in a big way. But several other countries have huge shale gas reserves. China, in particular, has the largest shale gas reserves in the world, and the country is eager to get at it. Last month, the Chinese government announced that it will invest $13 billion in oil and natural gas exploration.