Is cheap natural gas always a good thing?

at 10:32 AM ET, 01/21/2012

Recently, I noted a budding policy debate over whether the United States should export its newly abundant shale gas. Opponents have argued that exporting gas could hike prices here at home, hurting consumers.

(Spencer Platt/Getty)
Now those opponents, such as Rep. Ed Markey (D-Mass.), are getting some additional support for their arguments. The Energy Information Administration just released a study today estimating that domestic gas prices could rise as much as 54 percent by 2018 if current plans to create half a dozen new gas-export terminals come to pass. (The Energy Department would have to approve these terminals.) As the Wall Street Journal reports, some U.S. industries that rely on cheap natural gas, such as Dow Chemical, don’t seem particularly thrilled with that prospect, and are opposing a massive export boom. But is cheap natural gas always an unmitigated blessing?

Not necessarily. For one thing, as Dan Stumpf notes, natural gas prices are in freefall right now, thanks to a frenzy of shale-rock fracking and an unnaturally warm winter that is depressing demand. At some point in the future, presumably, the price could go so low that gas companies no longer find it profitable to keep producing. It’s quite possible to imagine scenarios in which the economy might actually benefit from higher gas prices, if only to support increased production. So that’s one possible point in favor of boosting exports.

Meanwhile, from an environmental and climate perspective, rock-bottom gas prices aren’t always a net plus. True, cheap gas is helping to drive older coal plants into retirement right now — and, since burning natural gas for electricity emits just half the carbon that burning coal does, that’s a huge gain from a global-warming perspective. But on the flip side, the gas glut could also undercut the development of wind, solar, carbon capture and other clean-energy sources. As Mason Inman reports, a recent MIT study examined different emissions and policy scenarios and found that ultra-cheap natural gas could crowd out other forms of energy — eventually leading to higher emissions and making climate targets harder to meet. So there’s no easy, pat answer here.

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