[BigTex]

I wonder why there is not more discussion of peak natural gas. Simmons talks about it, but there's not a lot of discussion out there about it.

Here are a few items that are cause for concern:

- Oil is portable; natural gas needs a lot more infrastructure to move around

- Unlike oil, which is produced in many countries and regions, a handful of players control most of the world's supply of natural gas

- I don't know what you do with a natural gas fired power plant if natural gas gets too expensive

- A huge amount of U.S. housing relies upon natural gas for electricity, cooking and heat. Thus, rises in price would hit their electricity and gas bills

- Given its literally ethereal nature, it seems like natural gas would be prone to much more dramatic price spikes if supplies got very tight

- There isn't an ethanol, biodiesel, oil shale and tar sands plan B for natural gas (at least not that I know of)

- The tighter the oil market gets, there is likely to be the sense that natural gas is another plan B for oil; thus, I see more demand pressure on natural gas at perhaps the worst possible moment

Anyone feel better about natural gas than they do oil?

[SILENTTODD]

Here in California we won't have to worry in most cases about heating, but I've read about 60% of our electric power comes from it.

I for one don't mind the heat. But we will have VERY HOT summers without air conditioning. Places like Palm Springs, Twentynine Palms, and where I grew up in the San Joaquin Valley are going to be for the desert rats only!

[KillTheHumans]

I wonder why there is not more discussion of peak natural gas. Simmons talks about it, but there's not a lot of discussion out there about it.

6,000 TCF in known deposits and a 100 TCF/year consumption rate means it might be a problem sometime, but it sure isn't one of scarcity during the next couple of decades.

Anyone feel better about natural gas than they do oil.

Absolutely. CBM and unconventional production completely reversed the US production decline and brought it to a new peak level, and the rest of world ignores that end of the resource spectrum. To say "there is alot more to be found" is an understatement.

[Jack]

UNG is doing nicely.

I think we'll see much higher prices.

Frankly, I'll enjoy it.

[BigTex]

6,000 TCF in known deposits and a 100 TCF/year consumption rate means it might be a problem sometime, but it sure isn't one of scarcity during the next couple of decades.
Absolutely. CBM and unconventional production completely reversed the US production decline and brought it to a new peak level, and the rest of world ignores that end of the resource spectrum. To say "there is alot more to be found" is an understatement.

If there is plenty, why is the price rising more or less in tandem with oil?

That seems odd.

[KillTheHumans]

If there is plenty, why is the price rising more or less in tandem with oil?That seems odd.

Depends on where you are. Sign a long term contract with Qatar and you'll pay what...$2.00/mcf? Spot market in the US? $ Maybe $12?

A thing is worth what someone will pay for it, and when we start competing with the Europeans for LNG coming out of the ME, we'll have to pay more to get it. I'll tell you this though, it sure makes it profitable to drill for those unconventional wells here in the US, and oil and gas guys ain't complaining about that.

[Starvid]

No one needs natural gas for anything. It's completely optional.

Oil on the other hand...

This is why peak oil is much, much worse than peak gas.

[FoolYap]

No one needs natural gas for anything. It's completely optional.

Really? Tell that to farmers who use fertilizer. Or companies that make plastics. Or anyone heating & cooking with it.

--Steve

[KillTheHumans]

No one needs natural gas for anything. It's completely optional. Oil on the other hand. This is why peak oil is much, much worse than peak gas.

Well, if that is so, then we can simply convert all natural gas into synthetic crude and put it into our gas tanks.

[ROCKMAN]

Starvid,

A little update on natural gas usage:

Over the last 20 years 75% of new homes in the US use natural gas for heating (that surprised the hell out me when I read that report...why I can still remember the stat.)

Also, most of the electrical gid in Texas is powered by natural gas. Which is why consumers are starting to be clobbered here now that they're cranking up the AC. aAl the electric utilities in the state have fuel surcharges to recover their higher costs for NG.

Most high energy consuming industries, like aluminum, rely soley of natural gas.

Perhaps you live where NG isn't utilized to a great extent. Or maybe you were just being sarcastic. But that's OK...I enjoy sarcasm butI'm a little slow so don't be too subtle about it.

[seahorse]

Sorry for the tangent, but if anyone has any info on this little NG company, I would appreciate your sharing it.

Ticker symbol is NFEI.

Yahoo Finance

[cube]

I think in the future NG (natural gas) will be too expensive to be used for producing electricity. Nuclear power and coal will fill that role.
The advantage of natural gas is it's very useful for providing heat to homes.

20 years ago NG was probably averaging only $2 per MMBTU.
So it made sense to build NG power plants.
It's now a whopping $12 per MMBTU.

$12 NG is to electricity
as
$100 oil is to transportation
It's expensive enough to create demand destruction. --> it might cost more money to turn on an air conditioner than it is to drive an SUV. *seriously*

[BigTex]

I think in the future NG (natural gas) will be too expensive to be used for producing electricity. Nuclear power and coal will fill that role.
The advantage of natural gas is it's very useful for providing heat to homes.

20 years ago NG was probably averaging only $2 per MMBTU.
So it made sense to build NG power plants.
It's now a whopping $12 per MMBTU.

$12 NG is to electricity
as
$100 oil is to transportation
It's expensive enough to create demand destruction.

What is your prediction regarding how natural gas prices will track oil prices from here forward? I think that natural gas prices potentially have more room to increase than oil prices, in part because the natural gas applications are less subject to demand destruction than oil applications.

Even if people turn their thermostats up or down seasonally Jimmy Carter-style, air conditioning and heat are still going to suck up a lot of natural gas and electricity from natural gas. Also, it's just a matter of time before plug in hybrids begin pulling on the grid as well.

What is involved in switching a natural gas power plant to coal? I suspsect it's not a simple operation, once the regulatory matters are factored in. In a lot of cities like Houston and Dallas, air quality is only fair right now. I wonder what it would be like if all of the power plants in the area were burning coal rather than natural gas.

[cube]

...
What is your prediction regarding how natural gas prices will track oil prices from here forward? I think that natural gas prices potentially have more room to increase than oil prices, in part because the natural gas applications are less subject to demand destruction than oil applications.
...

NG has a history of extreme price volatility that's because it is not "fungible" unlike oil. Most oil gets transported by ships. So if 1 oil supplier goes down, you can easily buy from another. That's why you'll never see $100 oil in one part of the world and $300 oil in another. Unless there was a war or a natural disaster that severed transportation that makes no sense.
NG however is the total opposite since it comes in via pipelines so basically it has a mind of it's own and no relationship to oil other than the price of everything is going up these days.

...
What is involved in switching a natural gas power plant to coal? I suspsect it's not a simple operation, once the regulatory matters are factored in. In a lot of cities like Houston and Dallas, air quality is only fair right now. I wonder what it would be like if all of the power plants in the area were burning coal rather than natural gas.

The actual NG power plants are cheap. It's the NG that's expensive. I don't think an NG plant can be converted to coal. Here's the funny thing. The cost of NG fuel is so expensive it might actually be cheaper to put a perfectly good working NG power plant into early retirement and replace it with a coal fired power plant.
You'll notice there's a lot of talk about "clean coal" these days. It's as if the energy policy of the 1st world made a complete U-turn in a couple years. I think this has more to do with NG prices going through the roof rather than coal being "clean".
//
Just wait till electricity prices go up and society will be happy to politically approve any project that will *hopefully* help bring prices down. I think 20cents / kWh would be the breaking point.
50cents / kWh is within the realm of possibility much like $300 oil is possible IMHO.

[emeraldg40]

[ Well Tex.....where in Texas are you?

Barnett Shale is gonna keep us in the gold for awhile here in N Texas quote="BigTex"]I wonder why there is not more discussion of peak natural gas. Simmons talks about it, but there's not a lot of discussion out there about it.

Here are a few items that are cause for concern:

- Oil is portable; natural gas needs a lot more infrastructure to move around

- Unlike oil, which is produced in many countries and regions, a handful of players control most of the world's supply of natural gas

- I don't know what you do with a natural gas fired power plant if natural gas gets too expensive

- A huge amount of U.S. housing relies upon natural gas for electricity, cooking and heat. Thus, rises in price would hit their electricity and gas bills

- Given its literally ethereal nature, it seems like natural gas would be prone to much more dramatic price spikes if supplies got very tight

- There isn't an ethanol, biodiesel, oil shale and tar sands plan B for natural gas (at least not that I know of)

- The tighter the oil market gets, there is likely to be the sense that natural gas is another plan B for oil; thus, I see more demand pressure on natural gas at perhaps the worst possible moment

Anyone feel better about natural gas than they do oil?[/quote]

[BigTex]

Just wait till electricity prices go up and society will be happy to politically approve any project that will *hopefully* help bring prices down. I think 20cents / kWh would be the breaking point.
50cents / kWh is within the realm of possibility much like $300 oil is possible IMHO.

I think the term "economically uninhabitable" will be applied to larger homes when electricity reaches that price.

Excessive square footage will be regarded as a kind of "financial black mold."

[KillTheHumans]

I think the term "economically uninhabitable" will be applied to larger homes when electricity reaches that price.

Excessive square footage will be regarded as a kind of "financial black mold."

A demonstration on why this assumption may not hold any more true than one involving automobiles, when one has the ability to become more efficient.

I've lived in 2 different places over the past decade. My costs for year round heating and cooling in the first house was $1.10/square foot living space/year. In other words, $1.1 * 1800 square feet = $2000/year heating/cooling costs.

Now, I moved just a short distance. My living space went from 1800 to 3100 square feet, plus I heat another 1700 square feet which isn't living space ( garage + basement ). Same electric and gas utility, no basic changes in weather during the years in question. If I had been stupid, and not paid attention to energy costs, I would have paid about the same for heating and cooling as the old place, call it $1.1 X 4800 = $5280/year.

But I am not stupid, and in this rapidly deteriorating post peak world ( ) I paid attention to utility costs. I paid $1700 for the first full year, $1700/4800 square feet = $0.35/square foot/year.

Cut my heating/cooling costs by 66% on a square foot basis, 15% on a gross basis. Double the living space. What is it called when you can have square footage AND cheaper energy costs than your neighbors? Smart!

( the key is skip DirectX and insulate, insulate, insulate...and throw some strategic tree's in as well )

[BigTex]

I agree with all of your ideas KTH and I have done many of them myself (to my house, of course, not yours).

I think that will work fine to counter the effects of a doubling of utility bills.

Beyond that, though, I think some people will struggle who are already spread a little thin even after the extra insulation is applied.

I do think that sales of high end efficient HVAC systems will benefit from all of this, though. That becomes cost effective at some point, just like a hybrid car does when gas prices reach a certain point.

[KillTheHumans]

Beyond that, though, I think some people will struggle who are already spread a little thin even after the extra insulation is applied.

I do think that sales of high end efficient HVAC systems will benefit from all of this, though. That becomes cost effective at some point, just like a hybrid car does when gas prices reach a certain point.

The economic shock of increasing basic costs, like in energy, and things which flow from it ( like nearly everything ) wasn't pretty in the 70's and I don't assume it will be pretty this time either.

Energy price increases come across as a nasty regressive tax, clobbering lower incomes worse than higher ones. People do get spread thin, and if you don't plan for these things in advance, it gets real expensive real fast trying to "prepare" for higher energy prices in the middle of everyone else doing the same thing.

Myself, I would really like to be a first adopter of the some of the new car technologies coming down the pike for next year, Honda diesels and the Volt, Nissans electric and various other goodies, but I have a feeling that there will be a high demand, and corresponding premium price, on the new machines for quite awhile.

Being prepared in more ways than one also means living close to work ( like 2 miles ) so one can walk or bicycle if you can't afford to drive much, I think it'll be interesting when real estate prices shift for more reasons than "drive till you qualify" issues.

[cube]

...
I think the term "economically uninhabitable" will be applied to larger homes when electricity reaches that price.

Excessive square footage will be regarded as a kind of "financial black mold."

I think the fastest way to bring suburbia to a screeching halt is unemployment. Almost every family is dual income these days. If 1 spouse losses their job (no amount of clever budget cutting) can makes things work if it literally takes 1 income just to pay the full home mortgage.
This is why I don't buy the "energy efficiency" will save suburbia argument. No amount of energy efficiency can mitigate the above scenario. Aside declaring bankruptcy and giving up the house, which some people will do, the only option left would be to literally turn the house into a mini-apartment and start renting rooms out. This is how I see suburbia slowly contracting.
//
not to get too far off topic but the biggest wild card right now IMHO is thieves. All it takes is 1 home to go into foreclosure and thieves breaking in to rip the copper pipes out for scrap metal and that would instantly bring the whole street down. Imagine 12 houses being broken into and the whole neighborhood can snowball from "middle class" to "Boyz n the Hood" real quick like a feedback loop.

Now that's more scary then natural gas prices.