Robert Pirog Specialist in Energy Economics
Michael Ratner Specialist in Energy Policy
to the growth in natural gas production, primarily from shale gas, the United
States is benefitting from some of the lowest prices for natural gas in
the world and faces the question of how to best use this resource.
Different segments of the U.S. economy have different perspectives on the role
natural gas can play. Suppliers, which have become the victims of their
own production success, are facing low prices that are forecast to remain
low. Some companies that have traditionally produced only natural gas have
even turned their attention to oil in order to improve their financial
situation. Smaller companies are having a difficult time continuing
operations and larger companies, including international companies, have
bought into many shale gas assets. Prices have remained low even as
consumption has increased, in part, because producers have raised production to
meet the demand and because companies have improved efficiency and
extraction techniques. Some companies, many with large production
operations, have applied for permits to export natural gas. This has
raised concerns from consumers of natural gas that domestic prices will rise.
The debate regarding exports is ongoing.
Industries that consume natural gas have seen input costs drop, and some have heralded
low natural gas prices as the impetus for a manufacturing revolution in
the United States. Some companies have begun to make major investments to
take advantage of the low natural gas prices, particularly in
petrochemicals. Other companies are waiting to see if prices will remain low
long enough to warrant major investments in new facilities. Meanwhile, the
electric power sector has already seen a transition from coal-fired
generation to natural gas. Low natural gas prices are also putting
pressure on renewable sources of power generation. However, increases in demand
will put upward pressure on natural gas prices.
The transportation sector, the one part of the economy vulnerable to foreign
energy supplies, is beginning to explore ways to use more natural gas.
Transportation makes up less than 1% of U.S. natural gas consumption and
would require billions of dollars in investment to increase that share significantly.
All of the change that has taken place so far has occurred despite
environmental concerns and regulatory developments at the state and
federal level that might curtail production. Natural gas is a fossil fuel
that produces various pollutants, some more than other fossil fuels and some
less. Methane, the major component of natural gas, is also a potent
greenhouse gas when released without burning. Other environmental concerns
focus on water use and disposal in hydraulic fracturing to extract natural
gas from shale formations.
Over the next five years, many of the issues being debated now may be decided.
The industry and market are adapting to the newly found supplies and the
concerns associated with them, as well as integrating more natural gas
into the economy. There are many evolving issues some of which Congress
can influence directly because of statutes and some indirectly. On the demand
side, legislation has been introduced regarding exports of liquefied
natural gas and alternative fuels for vehicles. There has been other
legislation related to environmental regulations of natural gas.
Date of Report: November 6, 2012
Number of Pages: 35 Order Number: R42814 Price: $29.95
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