Marcellus Shale: Natural Gas Price Tumbles
May 25th, 2010 | by BGuzzardi |
Lower Energy Prices mean Higher Productivity, more jobs and are good for business users and residential consumers. Lower prices for commodities means more jobs and a higher standard of living for everyone. Pennsylvania’s Marcellus Shale has the potential of making Pennsylvania energy independent, enriching property owners whose land is drilled, and enriching users with lower costs as well as increasing tax revenues with Pennsylvania’s net corporate income tax, the highest in the country.
1 barrel of crude oil has approximately 5.8 million BTUs. Thus the price of oil on a per BTU basis is roughly 5.8 times the price of a million BTUs of natural gas, or $28.42 per barrel at the same price as natural gas. Oil currently trades at roughly 3 times the price of natural gas on a BTU equivalent basis. Natural Gas costs less than Oil and Natural Gas is drilled in Pennsylvania so from a consumer point of view, whether a business consumer or a residential consumer, natural gas seems like best choice from cost point of view as well as energy independence (national security) point of view. Would you agree?
Drill Now, Drill Here , Pay Less. Energy is key issue in November- Cap and Trade is not dead.
CRUDE OIL: Futures rose above $80 a barrel on Monday, settling at the highest level in nearly six weeks as an continuing strike by Total SA refinery workers in France continued to stoke gasoline-supply concerns. Light, sweet crude for March delivery settled 35 cents, or 0.4%, higher at $80.16 a barrel on the New York Mercantile Exchange. It was the highest settlement since Jan. 12
Don Boudreaux discusses relationship between producer and consumer in context of free trade but analysis applies to Natural Gas. Natural gas prices are very attractive to business users and consumers and the cost of production is very profitable.
But the advocate of free trade nevertheless insists that production is justified only insofar as it satisfies genuine consumer demands. Consumption takes place for its own sake (at least that’s how economists do, and ought to, look at it). Production, in contrast, does not – or should not – take place for its own sake.
It follows that consumers ultimately should call the shots, and in competitive markets they do call the shots. Producers whose offerings are accepted by too few consumers quit their current businesses and go into others.
Consider the following example: you fly to New York City. You get a cab at LaGuardia Airport and ask the driver to take you to Times Square in Manhattan – which is west of LaGuardia. Soon, though, you notice that your cab is headed east.
“Where are you going?” you inquire.
“To Times Square, but via Montauk,” the driver responds.
“Montauk! That’s a hundred miles east of here, and Times Square is west of here! What the heck are doing?!”
Your driver informs you that the taxicab business isn’t just for riders; its for drivers, too. Drivers need incomes, and his income of late has been too low to enable him to pay his bills. “So,” your driver announces, “by first going out to Montauk before heading to Times Square, I’ll make a lot more money off of you than I would if I drove you directly to Times Square. You’ll get there, but just not as quickly or as inexpensively as you would if I drove you there directly. Relax and enjoy the view.”