by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Natural gas is withstanding the coronavirus-fueled economic crash in a way that its closely associated relative, oil, isn’t.
Oil prices have reached record lows, with the U.S. benchmark oil price briefly dropping below zero last month after trading at around $60 per barrel at the start of 2020.
The U.S. natural gas price, meanwhile, is stable, staying below $2 per million British thermal units, or MMBtu, a historically low level it has been hovering at for a while due to a glut produced from the shale boom.
Oil producers are shutting in their wells, prompting tens of thousands of layoffs, because the pace of the price collapse was so sudden, caused mostly by the fact that the pandemic has crushed demand for transportation fuels made with oil, as people forgo driving and flying.
“The negative impact on demand in gas markets is not as significant as it is with oil because it’s not being driven by transportation,” said Dustin Meyer, director of market development at the American Petroleum Institute, the largest U.S. oil and gas lobbying group.
U.S. natural gas production, by contrast, has remained steady as people stuck at home depend on it for power and heat. Because it’s been so cheap for so long, natural gas in recent years passed coal as the most used fuel for electricity, at 38% of the mix in 2019.
While some important uses for gas are falling, without the need to power or heat large office spaces and some nonessential manufacturing facilities, demand has picked up in other places, such as in feedstock for plastics used to make key health equipment.
COVID-19 has upended the energy sector along with much of the rest of our lives. Follow Carolina Journal Online’s continuing coverage of the COVID-19 pandemic here.