Student Post: Themes in Natural Gas: Production, Prices, and Pipelines Reading

As I was reading the assignment concerning Natural Gas: Production, Prices, and Pipelines I was struck by several basic underlying themes. The first major theme that caught my eye is that the natural gas prices have a high rate of volatility. This commodity, like all other goods fluctuates based on the laws of supply and demand, world market patterns, weather, global production and a myriad of other factors that influence the price of natural gas.

Second, although the price of natural gas is subject to shifting costs, the technology does exist for the United States to secure its own natural gas resources here at home. Energy independence is certainly a goal Americans can (or should) all agree on. Among the promising advances made by science and engineering includes coal gasification and carbon sequestration; a process which removes and harvests the carbon dioxide from coal and uses it to produce electricity for consumers. “Capturing C0₂ from the plant and sequestering the C0₂ in depleted reservoirs creates a ‘zero-emissions’ power plant.” As William Rosenberg aptly alludes, why not invest more in this type of energy development, especially when America is home to about ¼ of the world’s coal reserves.

Although the technology and science is encouraging, development of these resources and infrastructure will no doubt take large amounts of capital investment. Indeed “gas is about 30 times more expensive to transport than oil (on an energy equivalent basis), so its markets are crucially dependent on development of this infrastructure.” Some argue that the federal government should “get the ball rolling” by pushing for more private investment in this field.  This could be through tax incentives, federal funding, or block grants to states. Others favoring a laissez faire market vociferously counter by alleging that the government should not intervene; especially if there is a future in natural gas for private investment.

Finally, natural gas production and consumption is far more environmentally friendly than other fossil fuels such as coal or oil. “The carbon content per BTU of natural gas is only 55 percent of that for coal and 70 percent of that for oil.” Thus, by decreasing the production and consumption of “dirty” fuels like burning coal and increasing the output of natural gas developed in the United States, the country would not only be on the path toward greater energy independence, it would also be better for the environment. Sounds like a win – win situation.

As I was reading the assignment I also paused to reflect on an interesting numerical study outlining what percentage of natural gas is used in the various sectors of the American economy that rely upon natural gas.  Obviously not many people fuel up their cars with natural gas at the pump, but I was shocked to find that only “a tiny sliver of about 1% [of natural gas] is used in transportation.” Why is that? Why not rely on natural gas fired engines? Safety, cost, feasibility, technological reasons, or an entrenched obsession with oil (some of the major oil companies also have money and interest tied up in natural gas)?  The market certainly has played a role in suppressing the expansion of this technology. On a final interesting note – “the small Mideast nation of Qatar has launched a $20 billion investment into the GTL [gas-to-liquids] to turn its large reserves of natural gas into clean diesel fuel that will be priced competitively with crude oil on the export market.”