• The Gas Switch - Break free of high gas prices (Click Here)
Natural gas is flared off at a plant
outside of the town of Cuero, Texas. As oil and gold have melted down,
natural gas is a bright spot in the commodities market.
In the meltdown that is the commodities market, natural gas has
emerged as a bright spot, barely touched by the turmoil that’s
contributed to a global slump.
Oil has tumbled 19 per cent over the past three months on the
Bloomberg Commodity Index, and gold is down 8.6 per cent, helping send
the gauge to a 13-year low this week.
And U.S. natural gas? Up 5.5 per cent. That’s because shipments are
limited for now to North America, where hot weather has boosted demand
for the power-plant fuel.
That all changes when exports, starting as soon as this year, take
the gas market global. The fuel has been eating away at coal’s market
share at U.S. power plants.
Liquefied natural gas exports stand to erode domestic supplies,
giving coal a reprieve in the U.S. but thrusting the competition between
the two fuels onto an international stage.
“North America has been a gas island while commodities like oil are
traded worldwide,” said Charles Blanchard, an analyst for Bloomberg New
Energy Finance in New York. “Exports of LNG from the U.S. will transform
what’s been a very regional, balkanized market into a global
as record shale production and the
lack of foreign competition kept prices low. Gas plants produced more
power in the U.S. than coal for the first time ever in April, Energy
Information Administration data show.
Coal producers are waiting for 2018, when sufficient LNG exports
reduce domestic gas supplies, said Seth Schwartz, president and
principal of Energy Ventures Analysis in Arlington, Virginia. The fuels’
roles will change in the seaborne market, Schwartz said. LNG prices
will have to fall low enough to dislodge coal use at power plants.
“The competition that has taken place between coal and gas
domestically will likely be exported, resulting in a more intense
dogfight overseas,” Teri Viswanath, director of commodities strategy at
BNP Paribas SA in New York, said Wednesday.
“Is this the end of cheap gas? That global connection will begin this year and will likely take shape next year.”
Europe will probably be the first battleground between gas and coal,
then Asia, according to the International Energy Agency. Globally, coal
will dominate as the cheaper alternative to electrify emerging economies
in India, China and Africa.
“Gas is increasing and gas is competing, but there’s still a lot of
coal left,” said Carlos Fernandez Alvarez, senior coal analyst at the
IEA in Paris. “When you think about the eight billion tons of coal that
we burn, this is not going to change tomorrow or the day after.”