by S Fred Singer

All  bets are off for the future of energy in the United States and, indeed, the  world, as the price of natural gas plummets to ever-lower values — thanks to  the development of technology that can access gas and liquids trapped in  hitherto inaccessible shale rocks.  In 2011, shale gas accounted for a  quarter of U.S. natural gas production.  But this seemingly bright future  may depend on a court decision (expected in June 2012) and, of course, on the  outcome of the November elections.

The  Economics of Natural Gas

Consider  the history of natural gas prices just in the last few years.  In mid-2008,  the spot price (at Henry Hub) reached a peak of $13 per mcf (1,000 cubic feet,  with a heat value of 1 million Btu — denoted as 1 MMBTU) — having doubled  since mid-2007.  Since then, the price has decreased sharply, dipping to $2  in mid-March, and it now stands at $2.30.  If prices decline further,  natural gas will

be  cheaper than the average steam coal, which up until now has been the lowest-cost  fuel on a heat basis.

How  realistic is such a price path?  Operators drilling for gas are also  extracting large quantities of natural gas liquids (NGL) as well as crude  oil.  As pointed out by Richard Trzupek, the profit potential lies in these  liquids, as natural gas becomes simply a byproduct.  It reminds me of the  situation in the early 1970s, 40 years ago, when “associated gas” was so cheap,  only pennies per mcf, that it was flared at the well-head.  The problem  then was the lack of pipelines to convey the gas to consumers in major  cities.

Read more: http://www.americanthinker.com/2012/04/cheap_natural_gas_heralds_an_energy_revolution.html#ixzz1rypcLmcr