The Natural Gas “Crisis”

Where to start … those of us who pay attention to energy have seen dwindling natural gas supplies over the past year, but now they seem all the more pressing, so the politicians are getting all in a tizzy and wanting analyses of what, quite simply, is another example of the interaction of regulatory policy, supply, and demand. Reductions in domestic supply due to decreased land that is legally available to drill, in conjunction with the expectation of future import decreases from places like Canada if they follow through with Kyoto, have increased supply concerns for the near and far future. And demand increases as more electricity is generated from natural gas to comply with environmental regulations. Thus decreased supply and expectations of decreased future supply meets increased demand and expectations of increased future demand => higher average prices, and increases in price volatility. No mystery, no conspiracy.

Some articles discussing this development, and Alan Greenspan’s recent testimony in Congress, are from the Baltimore Sun (via New York Newsday), the Environmental News Network (which sees a conspiracy here to open more federal land for drilling), the Houston Chronicle, and the Boston Globe (with an oil price angle to boot).

Much more on this to come in the next couple of days …