Natural Gas Price Nosedive, Effects

Readers of this column need no reminder that I’ve been writing recently about plunging natural gas prices. But now, quoting Joker, is it just me or is it getting crazier out there?

February 17's Henry Hub commodity market close came in at $2.26 per million BTU. Holy Methane! That’s more than a two-thirds drop from the close just two months ago, $6.97, on the fifteenth of December.

Prices haven’t been this low since September of 2020. Indeed, except for brief periods over the last twenty years — May 2019 to September 2020, October 2015 to June 2016, February 2012 to April 2012 – natural gas has traded for more than it has been presently since the opening years of this century; usually much more.

And that’s in nominal terms. We’re not even adjusting for inflation. If we did do so, the resulting real commodity prices for natural gas would be considerably lower.

Among the effects, natural gas is going to seem more attractive to consumers — residential, commercial, and industrial. As well as to electric power producers.

As these low commodity prices are integrated in power producer costs and power markets, electricity is also going to seem more attractive to consumers of all classes. That further incentivizes the electrification of transportation, for example.

Of course, the “welfare benefits” of natural gas and electricity price drops are enormous. Hard-pressed low- and moderate-income households and energy-intensive commercial and industrial firms will experience some relief.

If natural gas prices remain in this low range for a while, or do not rise too much in the coming months and years, that creates some headroom for gas and electric utilities and their regulators. They can more easily consider investing in our transmission and distribution infrastructure.

Some say, “gas is good.” Then surely, “inexpensive gas is good.”