Sky High Natural Gas Prices Not Leading to More Drilling or Production

The world is quickly approaching an energy crisis as we move into the winter season. Power generation and home heating are expected to be areas of concern and come at a price that is far higher than consumers have seen. China has already began scheduling intentional black outs. Crude and Natural Gas should/would be the answer, however politics and policy decisions have handcuffed producers into a position that they are unable to help, even if they wanted to.

With natural gas and crude commodity prices rising, producers are unable to turn on production to ease the concerns of price and supply assurance. Coal and Renewables are unable to keep up with demand, especially in Europe and China. The world is quickly turning to Natural Gas as an answer but producing and exporting countries are less willing to oblige, even given the record high prices and arbitrages. American producers are simply restrained by policy and regulation while Russia is not in a better position to move natural gas past Ukraine into the rest of Europe. Similarly to the US, politics and policies have prevented natural gas exporting facilities and pipelines from being built that could ease the inevitable energy crisis.[1]

So why aren’t producers drilling/producing more given the arbitrage and historically high commodity prices? Russia has a grip on suppling Europe with natural gas, but policy and politics have prevented pipelines to allow gas to move past Ukraine. In the US, producers have faced the same challenges. LNG export facilities and pipelines to support those facilities have been squashed by bureaucrats and environmental red tape in Washington DC. Public producers have also focused more on investor returns and ESG than higher production. US producers would love to aide both Europe and Asia and turn on supply to ease the energy burden, but it simply can not help. The lack of infrastructure in the US has hampered their ability to supply the US, let alone other continents. Natural Gas is cheap and reliable if left to a capitalistic market where renewables aren’t subsidized.[2] Natural Gas now could develop into a world market like crude and prevent energy crisis and poverty, but bureaucracy has prevented it from thriving.

Given the red tape and policies obstructing natural gas, crude my be the unsung hero this winter season. Despite its obstacles, crude is a world market and has some distinct advantages and companies are now turning to crude as an energy source. It’s a swing fuel and in high demand. Companies realize that coal and natural gas supply is tight and now crude is also being procured as an electricity source in addition to its transportation uses. Natural gas prices being so high confirm that energy producers are worried about natural gas supply assurance. [3] Bureaucracy has manufactured an energy crisis on feel-good initiatives, but it hurts consumers the most.  This winter be prepared for record high prices and supply concerns.




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