Abundant Natural Gas Has Benefited Consumers

Mark Green
Posted January 11, 2021

Making energy more affordable for Americans is one of the biggest benefits of the U.S. natural gas and oil revolution. Over the past decade or so, abundant domestic reserves, unlocked by modern hydraulic fracturing and horizontal drilling, lowered consumer energy costs – even as household expenses for health care, education and food increased:

The challenge for everyone is not to take affordable, reliable energy for granted. Not too long ago the country was beset with rising annual costs for gasoline, ever-growing oil imports and dwindling domestic natural gas supplies. The natural gas situation was so alarming, lots of smart people believed the U.S. would need to build natural gas import facilities to help meet domestic demand.

Again, the shale energy revolution changed that storyline. We have plentiful supplies of natural gas here at home and increased energy security. The U.S. has become one of the world's leading natural gas exporters and was on track in 2020 to be a net exporter of petroleum and total energy on an annual basis for the first time in 60 years. That’s what energy security looks like.

This leads back to consumer benefits – reflected in a new U.S. Energy Information Administration (EIA) report showing that last year natural gas prices were at their lowest levels in decades.

EIA says that last year, natural gas spot prices at the national benchmark Henry Hub averaged $2.05 per million British thermal units (MMBtu), the lowest level since 1998. Henry Hub bottomed out at $1.66/MMBtu in June – the effects of decreased demand due to economic effects of the pandemic. Prices then increased the second half of the year as demand rebounded.

Specifically, for residential consumers, EIA shows residential natural gas prices fell over the past decade, thanks to the energy revolution:

API Chief Economist Dean Foreman:

“This also reflected the reductions in wholesale prices, and gas penetration into power generation is linked closely with wholesale gas prices at Henry Hub, relative to those of coal, though it has not translated into lower electricity prices everywhere, such as New England, where natural gas infrastructure has not kept pace with demand.”

In electricity generation, natural gas reached a record high last year, based on EIA monthly data through October and estimates for November and December. Natural gas used by electric power plants set a daily record high at the end of July. In the third quarter of 2020, 43.6% of the nation’s electricity was generated using natural gas. Wind and solar accounted for 8.2% of U.S. electricity generation in Q3.

The significance is clear: While U.S. consumers continue to be helped by decades-low natural gas prices, as well as other benefits associated with natural gas’ affordability, natural gas is essential to generating the electricity our modern society needs 24/7. This includes its direct role in power generation and its partnering role with wind and solar generation, supplying reliable fuel when there’s no wind or sun.

Keep in mind that this natural gas-fueled generation is largely responsible for dropping carbon dioxide emissions from the power sector to their lowest levels in a generation. No other country has reduced CO₂ emissions as much as the U.S. since 2000.

These facts are critical – for U.S. households, the broader economy and the nation’s efforts to protect the environment – and compelling, for the new administration and Congress in Washington.

These facts argue against hindering or cutting safe development and production by limiting or ending access to public reserves. They argue against using regulatory and permitting processes to hamstring development and block needed infrastructure.

Abundant domestic natural gas and oil is one of America’s strengths, not an asset to be foolishly discarded. Recent polling shows Americans understand the relationship between robust natural gas and oil produced here at home and U.S. strength, security and leadership.

And, as seen in the new natural gas price data discussed above, most Americans recognize the relationship between domestic energy and household budgets.