fb tracking

Natural Gas Pricing Dynamics Are Driving the Market

This is a repost of my blog at National Journal.

As I wrote in the Expert Blog at the beginning of this year, the primary attraction of natural gas today is its price advantage over competing fuels. Sure, the emissions benefits over coal and petroleum are nice and important, but pricing dynamics are driving the market. And it’s imprudent policy to assume that gas will remain cheap, or even affordable for that matter. While we most likely have a few more years of moderately-priced natural gas, we will see a return to the Bad Old Days of natural gas price volatility as soon as emerging and proposed infrastructure changes accelerate. Natural gas’ emissions benefits are no match for zero-emission competitors, but today’s cheap gas prices are luring crucial support away from the long-term renewables solution.

In the power sector, decisions are being made based on today’s low prices that commit significant parts of our electricity infrastructure to gas for the next generation. This will come at the expense of renewables, which, unlike natural gas, will only have a future cost curve that will continue to plummet. I can predict a future Energy Expert Blog after five years’ time bemoaning the natural gas price trap and “is it too late to ramp up renewables and efficiency?”.

Remember that natural gas, for all of its emissions benefits to its fossil fuel cousins, remains a messy extractive product. The folks that argue that all natural gas drilling pollutes drinking water are as correct as the industry folks who claim, always with a straight face, that fracking has never contaminated a single drinking water source (let’s start opening up those hundreds of nondisclosure agreements households have been forced to sign with drillers in exchange for getting their hands on trucked clean water to their rural homes). There is no such thing as benign fossil fuel extraction. There are risks and environmental costs associated with fracking, and there can be no doubt that the vast fracking revolution, complemented with weak federal (and, for the most part, state) oversight is a recipe for disaster. Water wars will define the next generation’s resource fight (it’s actually already beginning). Let’s not hasten that with natural gas’ inherent risks.

The recent revival of multilateral international trade talks with visions of using the 1992 Energy Policy Act requirement forcing approval of natural gas import/export facilities to countries with which we have a FTA requiring national treatment for trade in natural gas is fallacious. Sure the extreme price gap between North American and European/Asian markets is tempting, but the minute we become a significant exporter the fuel will no longer be affordable to fill our power plants and T. Boone Pickens’ patented trucks.

Natural gas will continue to be a part of our energy mix for the foreseeable future. But it must not―and cannot―serve as our foundation. That must be reserved for renewables and efficiency. The technology revolution is not fracking, but in solar PV and other renewables.

Tyson Slocum Directs Public Citizen’s Energy Program. Follow him on twitter @tysonslocum