Three years ago it was believed the U.S. was running out of natural gas.
Prices for natural gas were as high as $14 per million btu in 2006. Homeowners were being hurt by the high cost of natural gas.
There were plans to build a dozen new terminals for importing Liquefied Natural Gas (LNG) from the Mideast.
The U.S. was becoming tied to the world market for natural gas, where prices would be set by world markets, similar to the way oil prices are set.
Today, fracking has released natural gas that was trapped in shale, and U.S. gas prices are down to around $4 per million btu. Natural gas is being used more frequently to generate electricity. Plans to build the LNG terminals have largely been put on hold. Homeowners can look forward to low heating costs.
There are those who want to stop fracking, which would return the U.S. to the bad-old-days of high prices and dependency on world markets.
Russia has been the major supplier of natural gas to Europe. It is maintaining high gas prices and doing what it can to stop the emergence of competition in Europe from shale gas or imported natural gas from Asia. It’s in their interests to stop fracking in Europe.
France and Germany have put a stop to fracking, but Poland and Bulgaria have begun to explore for shale gas using fracking, in the hopes of freeing themselves from being under the heel of the Russian boot.
While the U.S. has broken the link to the world price for natural gas, the countries in Europe haven’t.
This has given rise to a new conflict between the Ukraine and Russia. The Ukraine wants to renegotiate the price it pays for natural gas, citing the emergence of lower cost shale gas. Russia says, too bad, “You signed a contract based on the high cost of gas, and you are stuck with it.”
Europe is watching this new conflict closely, remembering how Russia cut off the supply of natural gas to the Ukraine a few years ago, which also interrupted the flow of natural gas to Europe since Europe’s gas supplies flowed through the Ukraine.
Ukrainian President Viktor Yanukovych, who was supposedly an ally of Russia’s, has threatened to take Russia to international arbitration to decide their fight.
The fight over natural gas also exposes the desire of most Ukrainians to become allied with Europe and to join the European Union – this would be tantamount to a divorce from Russia.
The new Russian pipeline North Stream that runs under the Baltic Sea is an end run around Ukraine and gives Russia an advantage in its dispute with the Ukraine.
But, the Ukraine has an ace up its sleeve – it potentially has large amounts of shale gas. Ukraine is negotiating with Exxon and Chevron to develop shale gas and the Ukrainian Parliament has passed legislation to encourage the development of shale gas.
Fracking can free countries from being beholden to Russia and also allow the U.S. to develop a supply of low-cost natural gas that can last for 100 years.
The United States development of shale gas by using fracking is a shot being heard around the world.
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