From AEC: Can Natural Gas Prices Remain Low?

Utilities would like consumers to believe that natural gas prices will remain lower than oil prices for at least the next few years, but one analyst pokes holes in that belief in a recent article posted on The Motley Fool website.

Arjun Sreekumar questions the assumptions behind a 2014 IHS report entitled Fueling the Future with Natural Gas: Bringing it Home that suggests natural gas will continue to hold a price advantage. The report ‘may seriously underestimate increasing demand for gas, while overestimating supply growth,” he writes.

Three factors are combining to increase demand for natural gas: utilities, liquefied natural gas exports and energy-intensive manufacturing and petrochemical operations, the article states. A fourth sector, transportation, could also absorb a lot more natural gas supply, according to The Motley Fool.

At the same time, ‘there are concerns that production from shale gas wells will decline at a much faster rate than output from conventional gas wells,” the article continues. ‘According to estimates by Pete Stark, senior research director at IHS, the average flow from shale gas wells can plummet by as much as 75 percent in the first year of production. If shale wells’ decline rates turn out to be higher than the industry expects, it could significantly constrain production growth.”

‘I still think there’s a very strong possibility that natural gas demand from utilities, LNG exports, manufacturers, and perhaps even the transportation sector over the next five years could surprise to the upside, while supply growth could be weaker than expected,” Sreekumar writes. ‘As such, I find it difficult to envision a scenario in which gas prices remain below $5 per Mcf through the rest of this decade.”

To read more about this story and for a link to the original Motley Fool article, visit americanenergycoalition.org.

In further news, AEC congratulates Star Gas for its contribution efforts.

‘I am pleased to be able to pass on some very exciting news received just this afternoon,” said AEC Executive Director Tom Tubman.  ‘For the second year in a row, Dan Donovan announced today, that the Star Gas /Petro/Meenan /Champion /Griffith & Carroll companies will again match contributions to the AEC 2014 Fall Marketing Campaign with a 25 cent match on every dollar contributed up to $200,000 (or $800,000 contributed).  Last year’s matching challenge was critically important to the success of that Campaign; and this year’s offer aims to repeat at least that level of success.

‘This exceedingly generous challenge to Oilheat Industry’s Stakeholders to contribute to the AEC Fall Marketing Campaign with a 25% match recognizes the challenges our industry currently faces.  With the enormous imbalance between natural gas and heating oil prices today, it is critically important that we reach consumers with a strong pro Oilheat message along with telling the truth about natural gas.  We need to buy time and keep our customers while we wait for oil and gas prices to reset.  AEC has a top notch Campaign ready to deploy this year to do just that; and this matching offer will be a tremendous help to this committee to raise the necessary funds to get our voices heard.

‘So for my part, my sincere thanks to Dan, Star Gas and CEO Steve Goldman for their generosity and strong support for AEC; along with my goal, with your help, is to raise $800,000 and not leave any of Star’s $200,000 matching dollars on the table.”

The American Energy Coalition is a grassroots organization that advocates for Oilheat and the dealers who sell it. Formed in 2008, it represents Oilheat dealers throughout the United States, as well as manufacturers of Oilheat equipment and other professionals and vendors who work in Oilheat.