Abundant Natural Gas Leads To Record-Low Prices; Natural Market Forces Will ...
22.05.12
MP: Overall, this is a good temporary “problem” to have and demonstrates that the price system and competitive market forces are working as expected: an abundant supply of natural gas leads to falling prices, which lowers the profits of producers, which then leads to automatic, self-correcting adjustments and responses as the natural gas market moves towards equilibrium.
Those adjustments might include: a) increased demand for natural gas as residential and commercial consumers shift from oil and electricity heat towards natural gas (see CD post ), b) increased demand by energy-intensive manufacturing companies for steel, plastics, chemicals, etc. c) increased demand for vehicles powered by natural gas, d) increased demand for natural gas for electricity generation, and e) reductions in the production of natural gas as it becomes less profitable. All of those automatic adjustments will raise the price of natural gas as it finds a natural market-clearing
Source: Daily Markets