Boston – On the brink of the 21st century, a group of energy experts peered into the future of natural gas, and what they saw was quite rosy – and quite wrong.
To satisfy growing demand, producers could crank out a third more natural gas over the next decade at “competitive prices.” It could “power our economy” for decades beyond. Or so said the National Petroleum Council in its 1999 report.
But natural gas prices soon headed skyward, with prices charged by producers spiking late last year at nearly five times 1999 levels. This past winter, though starting off warm, saw the average gas-heating household spend a record $867, a 17 percent increase, according to federal data. As for that predicted robust supply, the country’s annual gas output has strangely slipped by 3 percent over the past six years.
Something is broken in the economics of natural gas, say people inside and outside the industry. The bright dream of an economy built squarely on clean- burning natural gas is slowly deflating.
Although we still derive almost a quarter of the country’s energy from natural gas, its share will slip in coming decades, federal forecasters now say.
“What’s going on now is so dysfunctional, it is really remarkable,” says industry consultant Jim Choukas-Bradley.
Retired Yale University economist Paul MacAvoy says price jerks and fuel crimps could soon rival California’s electricity nightmare of 2000-2001.
Industry leaders say they’re trying to fix things, but declining gas fields and harder-to-reach new ones are limiting output.
“You’ve got to drill more wells, you’ve got to run faster, just to replace what has declined,” says Bobby Shackouls, CEO of producer Burlington Resources and past chairman of the Petroleum Council.
While government policy turned less-polluting natural gas into the fuel of choice for new electric plants in the late 1990s, federal rules kept drillers away from vast stretches of public land, the industry complains.
Then came last year’s hurricanes.
However, most drilling restrictions were imposed years ago and added no new impediments to output during the price run- up, say federal energy officials. And the hurricanes only added the latest insult to a market with much bigger, older injuries.
Also, other trends should have cooled off prices.
