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Tuesday, 03 December 2013 08:46

US Consumers "Fracked" as Fossil Fuel Industry Benefits From Natural Gas Wholesale Price Drops

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afrackny12 3An article posted in The National Journal asserts that fracking -- dangerous to the environment, the earth and humans -- has resulted in huge price breaks in natural gas for businesses, but comparatively little for consumers.

The article reveals that the industrial sector has seen the wholesale price of natural gas decrease by 66% -- attributed to fracking increases in the supply of natural gas -- but only 23% for residential consumers.  This, of course, raises the issues yet again of who is benefitting from the large risk of fracking, which uses toxic chemicals, pollutes the environment, and ravages the earth's outer layer.

On a web page revealingly filled with large adds for Chevron -- "Which Industry is Creating American Jobs and Strengthening the Economy? The Answer Is Energy," one huge Chevron banner ad proclaims -- the article makes clear who is economically get a windfall from fracking:

Fracking has sent the price of natural gas plummeting, just not for the people who need it most.

The straight-out-of-the-ground price of natural gas is way down since the start of the boom in hydraulic fracturing. Back in 2008, users buying gas directly from drillers were paying an average of $7.97 per thousand cubic feet, according to the Energy Information Administration. By 2012, that cost—known as the “wellhead” price—had dropped to $2.66 in nominal dollars (not adjusted for inflation) resulting in a two-thirds discount in just five years.

However, those are the prices paid by pipeline operators, utilities, large industrial users, and other entities that can buy gas directly from the companies that drill for it.

By the time gas was piped into homes, individual consumers were still paying an average of $10.68 per thousand cubic feet. That’s down from $13.98 in 2008, but the $3.30 price drop is much smaller—both in absolute and relative terms—than the one that big buyers are getting further up the chain.

Yes, and of course, it gets worse:

And consumers are about to give some of those gains back. The EIA projects that heating costs for residential customers using natural gas will rise by an average of 13 percent this winter, adding an additional $80 to the typical household’s energy bill over the course of the season.

The upcoming price hike is a sticking point for the natural-gas industry as it tries to use the promise of economic benefits to sell the public on fracking. And for customers, it’s a setback at a time when real wages are largely stagnant, household budgets are tight, and large-scale price cuts would mean much-needed relief.

Or to put it less politely, US consumers are getting royally "fracked"!

The National Journal article -- not that the enormous Chevron ads might influence any writing, right? -- qualifies that investment in infrastructure and government regulations might account for the disparity in natural gas price decreases.

But given the enormous gap between the cost of natural gas to consumers since 2008 and the cost to fossil fuel wholesale buyers, the so-called explanation appears a bit lacking in credibility.

What is entirely missing in The National Journal article is any reference to the high-risk of fracking.  Were it to have been brought up in the piece, it would inevitably lead to a consideration of the risks versus the benefits to most Americans in terms of their gas bills.

That's a discussion the fossil fuel industry doesn't want to have, as it profits from radical drilling activity that can have a perilous impact on Americans.

Meanwhile, the average US citizen is barely feeling any relief from high natural gas bills, if at all.

Furthermore, the analysis in The National Journal doesn't provide figures that the natural gas wholesale price drop is due to fracking or to what degree it is due to fracking.  It just rest its case on that assumption without providing proof.

That raises a whole lot more questions, as it should.

After all, The National Journal article is indirectly sponsored, through ads, by Chevron (three prominent ones at the time of the writing of this commentary).

(Photo: CREDO)