A small rate cut reflects a big trend in natural gas

The News TribuneOctober 26, 2012 

Washingtonians are in for some good news on their natural gas bills – just in time for cold weather.

On Thursday, the Washington Utilities and Transportation Commission cut the gas bills of roughly 2 million people. Puget Sound Energy’s customers, for example, will pay 7.1 percent less – slicing $6 dollars off an $85.50 monthly bill.

The reason: The wholesale price of natural gas has been falling. Although it has risen since last spring, when it hit a historical low, it is still very low. (Fine print: The unit price is the “therm.” A therm was running between $4.50 to $5 last fall; in April, it hit $1.60; it’s now around $3.10.)

A 7.1 percent drop is something short of a bonanza. The better news is that it’s part of a long-term trend that promises to curb natural gas prices for years.

Part of the same trend was Tuesday’s startling prediction by the Associated Press: America may soon overtake Saudi Arabia as the world’s leading oil producer.

The U.S. Department of Energy predicts that the United States will produce a record 11.4 million gallons of hydrocarbons (including biofuels) a day in 2013. Saudi Arabia pumps 11.6 million barrels a day. One forecast has the United States hitting at least 13 million barrels by 2020.

This runs counter to fairly recent talk about “the end of oil” – a tailspin scarcity that would make prices spike and wreak havoc on industrial economies. The discovery of vast new petroleum reserves and the development of new drilling techniques have secured the world’s oil supply for the near future.

That doesn’t mean we’re going back to $2 a gallon at the pump. Oil is an international commodity; its price is hostage to political turmoil in the Middle East and elsewhere, as well as the thirst of China, India and other fast-developing giants.

The continuing worldwide abundance of petroleum complicates the task of limiting carbon dioxide emissions and curtailing climate change. But that problem was never going to get solved by making oil go away. The solution lies in competitively priced alternatives: green fuels, low-emission vehicles, better batteries and other energy technologies.

Natural gas is friendlier than oil, in any event. It releases less carbon dioxide when burned; as fuel, it’s a big trade up from oil and coal.

Also, our natural gas is not a global commodity, at least for the time being. Gas produced in North America pretty much stays in North America.

Washington’s utilities get their natural gas from the Rocky Mountains and from Western Canada. Expanding production in those areas will have a strong tendency to hold prices down in this state.

So Thursday’s rate cut isn’t an anomaly. It’s a sign that Washingtonians will be able to keep the heat on for quite a while yet.

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