JANUARY 12, 2012
U.S. energy companies are pumping so much natural gas out of the ground that prices are plummeting, and the cheap gas isn't likely to evaporate anytime soon.
Natural-gas prices fell 5.7% Wednesday to their lowest level in over two years—good news for people who use gas to heat homes and for companies that use it to power factories.
For U.S. energy companies, however, the domestic natural-gas market is looking increasingly out of whack. Despite a 32% drop in prices last year, onshore production rose 10%, and it is expected to rise another 4% this year, according to Barclays Capital. As a result, prices are expected to remain low for at least the next couple years.
Many energy companies have shifted their focus away from natural gas to more profitable oil. Still, natural gas is often a byproduct of oil drilling, and some companies are opting to burn off the gas they find because they don't have a way to transport it.
For example, Goodrich Petroleum Corp.—reluctantly, it says—is flaring gas from an oil well on a ranch in South Texas because a nearby pipeline is already full.