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While gasoline prices have steadily increased from an average of $1.50 in 2010 to about $3.30 as of last Thursday, staff from the Louisiana Oil and Gas Association are currently able to fill their natural gas powered cars up for about 27 cents a gallon.
“There has been an incredible turnaround here and in this country,’’ said Don Briggs, president of the Louisiana Oil and Gas Association. “We now have an abundance of natural gas coming from fracking and deep-water production. It’s amazing.
“In 2006, there were roughly 48 LNG (liquefied natural gas) plants in the country to import LNG because we did not have enough natural gas in the United States to meet the need. Now we will have to build LNG plants to export LNG. It’s been a huge turnaround in a short period of time.”
The country’s highly tapped resource is in such high supply, the price for 1,000 cubic feet of natural gas, enough to meet the natural gas needs of an average home for four days, has fallen almost $10 since 2008 to $4 in 2013. The low price has also caused a decrease in the number of rigs drilling for the ample supply of the product.
“At one point, there were about 140 rigs in the state drilling for natural gas, but now there are only about 25 because of the price drop,” Briggs said. “We drilled so quick and got so much. I think the price will eventually edge back up because there is less drilling. Next year, the price may be between $4 to $5 per MCF (thousand cubic feet). The abundance of gas is creating cheap natural gas prices.”
Most of the state’s natural gas is coming from fracking at the Haynesville Shale formation in the northwest part of the state, and the state is also continuing to drill for the resource offshore.
“We have unlocked a vast resource of natural gas,” Briggs added.
Unlike gasoline prices, which can easily increase with hurricane activity and unrest in the Middle East, natural gas prices will likely not be heavily influenced by such circumstances.
“Storms could have an impact on the price, especially if the supply stays interrupted for a long period of time,” Briggs said. “The fact that the United States is now a producer of natural gas also means we can become much less reliant on foreign sources of oil.”
The next big step in the country’s natural gas industry will be to export LNG, but the United States will not likely enter the world market for LNG until a few years from now while former import facilities are converted to export facilities and new export facilities are constructed. The United States currently exports natural gas in its gaseous form to Canada and Mexico.
While such LNG export facilities are not yet in the cards for southeast Louisiana, the Cheniere Energy Sabine Pass facility in the southwest part of the state was the first in the country to receive approval from U.S. Department of Energy.
“The U.S. Department of Energy also approved a facility in Texas and in Maryland,” said Bruce McDowell, manager of policy and analysis for the American Gas Association. “The earliest we can expect to see these facilities up and running will be 2015 or 2016. These were all once import facilities. To export liquefied natural gas takes a lot of equipment and effort to cool the gas to the required temperature, and it costs millions of dollars to build a facility.”
According to McDowell, the United States’ biggest natural gas users are electric generation companies and the industrial sector.
“The price got so low that it was competing directly against coal,” McDowell said. “People are trying to save money and cause less pollution. Natural gas is cleaner and cheaper than most other fossil fuels.
“The number of residential and commercial customers is also increasing, but the demand has remained relatively flat because consumers are using it wisely. They are using more efficient appliances and furnaces that are up to 96 percent efficient. People are also building tighter, more efficient homes.”
Mass produced vehicles that run on natural gas are still a few years away, and McDowell said such vehicles would be good for fleet vehicle makers and long distance transport vehicles. The United Parcel Service as well as many waste management companies, transit companies and airports around the country are also using natural gas powered vehicles.
While hurricanes and conflicts in the Middle East have very little effect on the price and drilling activity of natural gas, the same cannot be said for gasoline prices.
“Gas prices really depend on the events of the day,” said Don Redman, spokesman for AAA Louisiana. “We tend to stay away from making gas price predictions. It’s such a volatile market. Prices can change quickly.
“Even though there have been very few hurricanes this season, we are still at historic highs. The good news is that we are better off this year than we were last year. Gas was $3.68 at this time last year, but Hurricane Isaac had just passed.”
Right now, supply, demand, the growth of the economy and the conflict in Syria are several variables effecting gas prices.
“The West Coast is having some issues with some of its refineries, and we hope that will be resolved quickly,” he said. “Any escalation in Syria could also quickly change the price consumers are paying at the pump.
“Crude oil is now $106 a barrel and if it would get to $95, gas could be less than $3 a gallon.”
According to Redman, September and October are typically slow months for travel, and the spokesman said he saw gas prices as low as $3.20 last week in the New Orleans metro area.
“Stations will be switching from summer to winter grade gasoline,” Redman said. “Prices will likely start to go back up toward the end of October and will stay up through November.
“In the winter, there is a transition period for refinery maintenance. Prices will go up a bit because of that because production will be down a bit.”
