“If I had a world of my own, everything would be nonsense. Nothing would be what it is, because everything would be what it isn’t. And contrary wise, what is, it wouldn’t be. And what it wouldn’t be, it would. You see?” Alice, in Wonderland
Predictably ignored, one could argue that the biggest energy reality that we face is very low natural gas prices encouraging more infrastructure and demand. Low gas prices forecast over the mid- and long-term are going unmentioned as the driving force behind our “dash to gas.”
This year since mid-January, U.S. gas prices have been below $2.00 per MMBtu, an insanely low price for increasingly the world’s go-to fuel. Let me be clear, the floor for gas prices over the past four years has been $2.50. Moreover, at $1.44 last week, gas prices hit their lowest levels since 1995 despite U.S. gas production being down to 86-87 Bcf/d, compared to 93-94 Bcf/d pre-pandemic.
In fact, U.S. gas demand has remain resiliently high even in the face of COVID-19. The primary challenge for our gas market has been low prices globally reducing the competitiveness of U.S. LNG sales. Our gas exports are down some 60%. Sub-$2.00 gas in Asia is an obvious problem for our rapidly expanding LNG export business, which has now really been forced to think long-term even more. Indeed, we know that the pandemic is a temporary calamity, and the need for more natural gas will eventually regain an upward trend.
Gas is a low-carbon, low-emitting fuel, whose use has been encouraged by the International Energy Agency. Gas is the reason why the U.S. has been cutting its CO2 emissions faster than any other country. Gas now supplies some 40% of U.S. electricity and is on its way to becoming our main source of energy, surpassing its older and still bigger brother, petroleum.
As of today, there was no contract on the gas futures curve trading above $3.00 until January 2031 – stunningly prices for the 2020s decade. This is a clear sign that traders have major confidence in future U.S. gas supply. Even as policies continue to shift toward favoring renewables, extremely affordable costs will give more reliable and flexible natural gas an obvious advantage.
But in truth, I would argue that the cost of natural gas is becoming less relevant. We have no choice but to use it. A systematic rise in gas consumption has been steadily embedded into America’s energy complex. A huge portion of the U.S. energy supply infrastructure is being built upon natural gas: “Supreme Court ruling seen as boon to natural gas pipelines.”
As reported by American Public Power Association, natural gas now accounts for 44% of our electricity generating capacity, more than double second place coal. Highly promoted solar, for instance, is just 3%. Wind less than 9%.
From 2014-2019, gas added 64,00 MW of capacity, or nearly 45% of all our additions, compared to 30% for wind and 23% for solar.
And unlike gas, nobody is talking about the fact that the prospects for solar and wind are limited by geography, rather obviously. Solar and wind are also intermittent so the capacity that they offer is nowhere near a 1-1 comparison with highly dependable natural gas.
Indeed, a forgotten reality check from the University of Oregon: “displacing one kWh of fossil-fuel electricity would require over 11 kWh of electricity from alternative sources.”
It goes without saying that electricity will remain indispensable, and demand could boom as we seek to utilize more electricity for a better environment. “Deep Electrification’ Means More Natural Gas.” None of this is a surprise of course. In 2019, we used 11,310 billion cubic feet of gas for electricity, a 40% jump since 2014 – even more impressive since U.S. electricity demand has been flat.
This irreplaceability of gas (and oil for that matter) is why any U.S. politician being “anti-fracking” is simultaneously being “anti-reality.” With fracking accounting for around 80% of our domestic gas supply, any policy significantly curtailing its deployment would face such a painful day of reckoning that it would be reversed.“Why A Ban On Fracking Will Never Happen.”
It hardly surprises me that nobody is talking about this low-cost, more natural gas demand reality. Individual reasons abound, they want you to believe in an energy future that lacks all evidence of ever coming into existence.