The recent spell of cold weather has driven natural gas prices to their highest level in more than two years, according to a recent article on The Motley Fool.
The article states that the low natural gas prices seen in 2012, after a frenzy of new gas drilling generated record natural gas supplies, were “likely unsustainable.” In fact, the article states, the December 2013 price was more than twice as high as the price in the spring of 2012.
Prices dipped so low in 2012 that many of the recently drilled natural gas wells became unprofitable, and producers shifted their focus from natural gas to production of oil and other fossil fuel products.
Even at today’s elevated levels, natural gas prices may be unsustainably low. A recent study by Rice University shows that prices need to rise higher still for producers to be able to turn a profit consistently, the article states.
Natural gas drillers may face more obstacles in the years ahead, according to the article. “Thousands of wells have already been drilled and the most productive wells were drilled first. The next round of wells may not be as productive. Perhaps more importantly, the proliferation of drilling has bumped up against local resistance in many places. Voters in the cities of Fort Collins and Lafayette in Colorado recently passed bans on fracking. And on December 20, the Pennsylvania Supreme Court shot down a state law that prevented local zoning authorities from restricting hydraulic fracturing. The decision injected a lot of uncertainty about the trajectory of the industry in Pennsylvania, as many cities and towns may try to pass local fracking bans.”
To read The Motley Fool article, click here.