If you rely on natural gas for heating your home, you’re in luck this winter. Yet again, consumer natural gas prices are headed downward. This trend is not new. For the last 4 years gas prices have felt the pressure of excess supply. The reason for the supply glut is the result of a revolution that is occurring in gas exploration. A relatively new drilling technique commonly refereed to as fracking (horizontal drilling conducted by hydraulic fracturing), has given birth to the ‘shale gas’ revolution.
- Idaho Intermountain Gas reduces prices by 4.4%
- Piedmont Natural Gas reduces prices by 7%
- Connecticut Light & Power reduces prices by 7.5%
- New Jersey’s PSE&G reduces prices by 4.6% (which totals 35% since ’09)
What’s quite interesting from an investment perspective are the challenges and opportunities that this new revolution has caused. For example, many of the new gas fields that are being developed are in regions that lack the infrastructure to transport gas via pipeline from the field to the refinement center. As a result, rail lines/cars from companies like Union Pacific (UNP) are seeing a increase in demand in places like North Dakota.
Another interesting point to ponder is the fact that natural gas does not have the distribution network oil has. Companies can transport liquid natural gas across the ocean, but it takes infrastructure to accomplish this task. The infrastructure is lacking because of decades of countries (like the U.S.) having limited supplies of natural gas. Therefore, the thought out exporting the product was more or less preposterous.
Being that the U.S. is swimming in natural gas and cannot easily export the product overseas, U.S. consumers of the product are in a great spot to enjoy depressed prices.
Look forward to the January edition of TheMarketCapitalist.com newsletter. I will be exploring further ways for investors to benefit from the boom in natural gas production.