As we continue to make the case on Capitol Hill for expanded exploration and production of natural gas on the outer continental shelf (OCS), I’ve encountered a recurring argument from staffers whose bosses would have no problem with putting OCS energy leasing bans back in place.
The price of natural gas is half of what it was less than a year ago, they say, and your own industry people (meaning the producers) tell us supplies are abundant. There is no real need, they conclude, for more access.
The point being missed in this argument, however, is that the economic law of supply and demand is still at work. Supply today exceeds demand, thus the drop in prices, whereas just a few years ago the reverse was true. Despite the cold winter so far, demand for natural gas is way down due to the recession. People are simply not buying things like houses or cars, and they are buying fewer of other things like clothes or even bottled water. And all of this impacts the demand for natural gas.
Think about what goes into a new car – steel, glass, plastic, aluminum, fiberglass – all of it is natural gas intensive. The huge drop in gas demand in the industrial sector, especially in manufacturing, has led to excess available supply, and indeed to lower prices. But now is not the time for complacency!
It may take several years for our economy to recover and while low energy prices may have lessened the sense of urgency we felt this past summer, our lawmakers need to look at the long-term reality of the situation. It will take years if not decades to find and bring new resources to market. Because of this lag, failure to act now to ensure we have the supply that the future economy will demand, will only ensure high-prices for all.