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The good and bad of gas prices

April 21, 2012
Salem News

In July 2008, the wellhead price of natural gas in the United States was $10.79 per 1,000 cubic feet. By this week it had plummeted below $2.

For many Americans, that is wonderful news. The cost of heating homes was much less last winter and this spring, and the reason is not just because of mild weather.

Some are concerned that this ''good'' news may actually be bad for the local economy. Gigantic reserves of gas in the Marcellus and Utica shale formations have been unlocked during the past few years.

The Utica formation underlies much of this area. Thousands of area residents have been involved in the feverish rush by gas companies to obtain leases to drill for gas and oil. Hundreds of millions of dollars in ''bonus payments'' have been handed out to those signing mineral rights leases.

More money, those signing leases have been assured, will come in the form of royalty payments once gas is produced from the wells. But royalties are percentages of the prices charged for gas. When they drop, area residents won't get as much money.

Fear not.

The real, sustainable, economic impact for Columbiana, Trumbull and Mahoning counties is in manufacturing, directly and indirectly related to the shale play. The low prices should actually stimulate that development if local leaders continue handling the boom properly.

The low price and easy access of natural gas and its byproducts make it more attractive for companies to build factories here.

''Low-cost natural gas is the elixir, the sweetness, the juice, the viagra,'' Don Logan, president of the Louisiana Oil and Gas Association, told Fortune magazine recently. ''What it's doing is changing the U.S. back into the industrial power of the day.''

Take Shell Chemical's proposed cracker plant for Monaca, Pa., less than an hour from Columbina County. Many business experts agree with MarketWatch, which said the plant should ''encourage suppliers and satellite businesses to set up or expand regionally.''

The natural gas prices and supply glut have caused drilling in the Marcellus Shale to subside, which is more good news for the Mahoning Valley. Since the Utica has wet gas and oil, Columbiana, Trumbull and Mahoning counties are about to become leading players in the industry.

Even those in the Marcellus need not worry. Our nation's appetite for energy, including that produced from gas, is enormous, and the low prices will increase the overseas demand for American natural gas.

As manufacturers and even some electric companies build new gas-fired plants, demand will grow even more.

Times are not good in the dry gas fields - but only for now. At some point, probably within a few years, prices will go back up. They always do.

 
 

 

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