Walt Laws−MacDonald | Show Me The Money!

Sticking with the exciting topic of energy, I’d like to shed some light on our country’s “other” fuel: natural gas. Not quite as much fun as oil, but just as explosive, and a lot cheaper too.

The extraction process of natural gas, called hydraulic fracturing, or simply “hydrofracking,” has come under heavy criticism in recent months, and for good reason. Tales of water contamination, clouds of smog and other environmental infractions at existing well sites have taken the spotlight in the discussion. But I believe the focus should be on whether or not hydrofracking is economically viable before we condemn it for its hazards.

Natural gas is trading at ten−year lows and shows no signs of rebounding anytime soon. Natural gas peaked near $15 per million British thermal unit (BTU) in 2005, after Hurricane Katrina crippled tank farms in Louisiana. But since then, the price of natural gas has moved — like the brilliant Irish−British boy band — in one direction — and that direction is down.

Natural gas’s rapid drop in price can be explained by basic economics. Our county’s natural gas reserves have steadily grown, more than tripling from 2.5 trillion cubic meters in 2008 to 7.5 trillion cubic meters today. The front month contract — which is most often quoted — now trades at little more than $2 per million BTU.

As supply increases, prices fall. In a normal market, this downward pressure on prices is usually counteracted by increased quantity demand. But at this point, our country simply has more natural gas than it knows what to do with. The primary use for natural gas is energy production. But even though natural gas has proven to be a cleaner−burning fuel than traditional coal or petroleum−based fuels, the technology needed to utilize our country’s glut of natural gas simply does not exist at this point.

Several cities and automobile manufacturers have begun developing buses and trucks that run on natural gas instead of petroleum−based fuels. However, readying both the engines and fueling stations for mass market implementation will take several years. Even then, most companies have chosen to focus on developing electric or hybrid systems.

Before we move forward with hydrofracking as a country, we need to reinstate natural gas as a useful and valued commodity. With crude oil prices stuck near three−year highs, the demand for an alternative energy source clearly exists. Prices at the pump have broken $4.00 per gallon, and both political and market pressures are pushing consumers to use alternative sources of energy.

In a strongly pro−fracking 2011 editorial, the Wall Street Journal stated that “New York ... has missed the shale play by imposing a moratorium on fracking. ... In this age of media saturation, a single serious example of water contamination could lead to a political panic that would jeopardize tens of billions of dollars of investment.”

The editorial fails to address, however, what these investments will go towards. The extraction process is important, but our country’s billions would be far better spent developing a better market for natural gas.

Wall Street has said for months that it is only a matter of time before people start to realize that natural gas is both a more cost−effective and a moreenvironmentally friendly way to create power. So why sink money into production when the demand has yet to be proven?

The country needs to invest in research and development for natural gas. President Obama has made it clear that his “all−of−the−above” energy policy is interested in keeping natural gas production high, even as prices have yet to bottom out.

Developing a competitive market for natural gas would benefit both consumers and producers. Taking pressure off petroleum−based fuels would lower gasoline and heating costs for all Americans, while increasing demand for natural gas would increase profits for the companies and people that operate the wells. Connecting these two will take time, but investing in long−term growth should trump short−term profits.

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