By Jonathan Fahey
NEW YORK — The price of natural gas has fallen below $2 per 1,000 cubic feet for the first time in more than a decade, a remarkable decline for a commodity that not long ago was believed to be in short supply.
The U.S. supply of natural gas is growing so fast that analysts worry the country’s underground storage facilities could be full by fall and lead to further price declines.
On Wednesday, the futures price of natural gas fell to $1.984 per 1,000 cubic feet, its lowest level since January 28, 2002, when it hit $1.91. If the price slides to $1.75, it would be the lowest since March 23, 1999.
Natural gas production has boomed across the country as energy companies employ new drilling techniques to tap previously untouched reserves.
The process has raised concerns about water safety and has been banned temporarily in New York and New Jersey. But where it has been allowed, it has led to increases in drilling, job growth and production.
The falling price of natural gas has been a boon to homes and businesses that use it for heat and appliances, and for manufacturers that use it to power factories and make chemicals, plastics and other materials.
Another benefit: Electricity costs are lower because natural gas is used to generate about a quarter of the nation’s electric power.
From October through March, households spent $868 on average on natural gas, a decline of 17 percent from last winter. Those savings have helped relieve the burden of rising gasoline prices. Households spent $1,940 on gasoline from October through March, a 7 percent increase from the same period a year ago.
There is so much natural gas being produced — and still in the ground — that drillers, policymakers, economists and natural gas customers are trying to figure out what to do with it. Last year, the U.S. produced an average of 63 billion cubic feet of natural gas per day, a 24 percent increase from 2006. But over that period consumption has grown just half as fast.
The low price is hurting companies responsible for bringing gas to market. Drilling in many fields is no longer profitable, and the stock prices of natural gas drillers are falling in anticipation of declining profits and scaled-back growth plans.
Some of the nation’s biggest natural gas producers, including Chesapeake Energy, ConocoPhillips and Encana Corp., have announced plans to slow down.
Here’s more about what natural gas is, what it is used for, who makes it and where it comes from:
Natural gas seeps baffled early civilizations, and likely inspired the Ancient Greeks to build the shrine known as the Oracle of Delphi. In the U.S., the natural gas industry was launched in 1859 when Edwin Drake struck oil and gas in Titusville, Pa.
Natural gas prices were regulated for most of the last century. It wasn’t until 1993 that the last federal price control was lifted.
When natural gas is pulled from the ground, it is 70 percent to 90 percent methane, a simple molecule of carbon and hydrogen that is the most abundant organic molecule on earth.
Methane is what gets delivered to homeowners. But the natural gas that comes out of the earth also contains some ethane, propane, butane and other hydrocarbons. These other hydrocarbons are separated from the methane and sold to chemical companies and other industrial users.
As recently as five years ago, natural gas was thought to be in short supply in the U.S.
Then engineers learned to drill horizontally into shale formations and inject millions of gallons of water, sand and chemicals to break open rock and free the natural gas trapped inside. Enormous reserves of gas that were suddenly economical to produce were found in the East, Southeast, Midwest and West.