Unintended Consequences for Natural Gas as Drillers Turn to Oil

Link here.

The US is awash in natural gas, and the price for natural gas is incredibly low. Oil and gas producers are increasingly turning to more profitable oil. The only problem: they keep finding more natural gas.

A bit from the linked article above:

With U.S. natural gas prices maintaining a significant discount to crude oil, producers have every incentive to redirect both capital and drilling to oil and liquids-rich gas plays. And while that shift is paying off for corporate bottom lines, the domestic production mix has failed to turn as quickly as anticipated, putting further pressure on an oversupplied U.S. gas market.

Figures from the Energy Information Administration (EIA) show that gas production from the U.S. lower 48 reached a record 66.2 billion cubic feet per day in September, up 10.5 percent from the same month in 2010. That growth more than offset year-over-year declines in the Gulf of Mexico and Alaska.

The uptick in domestic gas production comes even as the number of rigs directly searching for gas in the country has slipped 6 percent since the start of the year, to 856, and the number of horizontal gas rigs has flatlined since late 2010, Baker Hughes data show. As such, growing lower 48 production has instead been the consequence of associated gas volumes produced by rigs targeting oil as well as improved recovery rates at the "liquids-rich" gas plays whose natural gas liquids (NGLs) offer producers robust economics even as gas prices languish.

Wow, it would be great to have an administration that was pro-growth. The domestic energy picture is incredible. We are in the process of extricating ourselves from two wars. We've extended the payroll tax break putting $40/month (as much as $80/month for many) back in the pockets of the average American (for two months). It could be morning in America if we just had a Reaganesque outlook.