Natural Gas Boom Hints At U.S. Energy Sufficiency
Posted 07/11/2012 06:56 PM ET
United Parcel Service (UPS) is adding 48 trucks to its natural-gas-fueled fleet. The tractor-trailers travel between Las Vegas and Southern California, relying partly on UPS' own fueling stations.
These steps are just snapshots of a larger revolution that is gripping the energy industry and may profoundly impact consumers and business — for the better.
After decades of rising prices, hostile foreign suppliers and warnings that Americans will have to bicycle to work, the world faces the possibility of vast amounts of cheap, plentiful fuel. And the source for much of this new supply? The U.S.
"If this is true, this could be another dominant American century," said Brian Wesbury, chief economist at First Trust Advisors, money managers in Wheaton, Ill.
U.S. natural-gas production is growing 4% to 5% a year, driven by sharply higher shale gas output. Shale gas production is forecast at 7.609 trillion cubic feet this year, up 11.6% from 2011 and 12 times the 2004 level.
Political Obstacles
Challenges remain, including political hurdles. It remains to be seen whether the U.S. can achieve the holy grail of energy self-sufficiency. But economists aren't ruling out the possibility.
"This is credible," said Mike Montgomery, chief U.S. economist at IHS Global Insight. He says that if the U.S. reaches self-sufficiency, its vast stores of natural gas will make the difference.
Natgas prices have plunged 83% since their December 2005 peak, which is why truckers are switching over their fleets. Natgas now costs far less than diesel, truckers' longtime fuel of choice.
Maybe the U.S. won't be the next Saudi Arabia. But economists say it could shift from energy importer to major exporter.
"Evidence is mounting that a technology revolution in the energy industry is rapidly increasing the supply of available energy commodities, especially natural gas and oil embedded in shale," veteran market strategist and economist Ed Yardeni said in a research note.
"The consequences of more abundant and cheaper energy are likely to be just as beneficial to global economic growth, if not more so, than the consequences of the High-Tech Revolution," he wrote. "That's because energy costs impact the standard of living of everyone on our planet."
In an interview, Yardeni further compared the change to the technology revolution. Sharp advances in information processing stimulated the entire economy in the 1990s. First, information processing became a booming industry in its own right. Also, as that technology was put to use by other sectors, it made them more efficient. Productivity increased.
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