One of the most bullish long-term economic stories in the U.S. is the shale energy boom. Thanks to advanced drilling technology like hydraulic fracturing (aka fracking), American energy producers have been able to tap insane amounts of hard-to-reach fossil fuels in North Dakota, Pennsylvania, and Texas.
But if the U.S. is producing so much energy, then why are our winter heating costs exploding? Natural gas prices are at their highest levels since 2010.
In one word: infrastructure.
We just don’t have the pipelines (yet) to get energy from the new sources to the end users as the weather gets chilly.
Here’s Goldman Sachs’ Samantha Dart:
The recent $US120/mmBtu spike in gas prices in New York underscores the ongoing bottleneck issues that plague some of the high gas consuming areas in the country. The system’s inability to deliver enough natural gas to where consumers are, especially given that the fastest-growing shale gas play in the US, the Marcellus, is nearby, raises the issues of what it takes to solve such bottlenecks and where and how such rapidly growing production can be allocated, as producers have faced some bottlenecks of their own. Specifically, Marcellus production growth reached almost 4 Bcf/d in 2013, with this increased supply having had a direct, negative impact on the regional basis (for producers), while consumer prices (city gates) have benefitted little if at all from the surging levels of production.
Fortunately for us consumers, there are a lot of pipeline projects in the works. Dart identified five major pipelines that’ll come online between April 2014 and March 2016.
These things don’t happen overnight. But when they happen, we can look forward to more stable and cheap energy costs.
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