A June assessment from the American Gas Association (AGA) revealed the highest resources evaluation in history, equaling over 100 years of natural gas supply. These unprecedented numbers have lead to the lowest natural gas prices in seven years.

With approximately 60 percent of American homes using natural gas to fuel appliances, the drop in price will result in lower utility bills—something everyone welcomes during a time of recession. AGA points out that despite a 70 percent increase in households using natural gas during the past three decades, there has been virtually no growth in emissions in this sector.

Moreover, the price of natural gas in the U.S. being approximately one-fourth the price of oil, paired with the reduced carbon emissions from NGVs, may increase the incentive to purchase a natural gas vehicle or convert a gasoline-powered vehicle.

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Natural gas prices at seven-year low may cause increased sales of natural gas vehicles such as this 2009 Honda Civic. Credit: Wikipedia.org

Countries, such as China, are taking advantage of the depressed prices through large purchases of iron ore, copper and oil. They recently made a $41 billion liquefied natural gas deal with Australia—the largest deal ever brokered between the two nations.

Businesses that use natural gas as an important fuel for many of their utilities and factories are also welcoming the drop in operation price.

The plummeting natural gas prices are partly a result of an abundant supply of oil and an insufficient demand to meet that supply. According to the natural gas stockpile report by the U.S. Department of Energy, the underground storage in the lower 48 states rose to about 3.2 trillion cubic feet as of August 21. That storage level is 21 percent above the level in 2008. While it is normal to have an excess amount in the summer months, some experts worry that the U.S. will run out of storage capacity before winter begins.

While the lower gas prices are being well-received by most, some gas producers have been hurt by the sharp decline. Industry leaders are concerned that the smaller, independent companies will be bought out by the larger companies unless the prices recover.

The relatively moderate temperatures of the summer, improvements in drilling technology, and the rising gas production in regions away from the Gulf of Mexico have all been contributing factors to the ample storage and depressed prices.

It seems that the natural thing to do in this case would be to cut back production until the market evens out. U.S. producers, however, are hesitant to cut production since they have already cut back on the number rigs drilling for new gas by more than half since September 2008. If the demand does not rise, however, they may be required to slow or even shut down production.

With the lowered amount of production and the fluctuating economy, economists are optimistic that the prices can quickly rebound. Once the economy starts to recover (as it always does), prices will also recover quickly, and the demand for current inventories of natural gas will again rise. But for just a little while, some will be content with their lower gas bills.




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