And now, the gas glutJanuary 12, 2012
In a pair of posts last October (here and here), I wondered whether we might be in or approaching a “gas bubble” due to the rapidly growing shale gas sector. At the time, I related an analysis that, if all the proposed shale gas projects proposed over the next 20 years came to fruition, then the world would have approximately twice as much gas than needed for projected use. It seems we won’t have to wait that long for the bubble to burst. Today, the Wall Street Journal reports on the “Gas Glut” due to American exploitation of the shale resource. Natural gas prices and futures are falling rapidly as production is already outstripping projected demand. That the glut is occurring now is probably a good thing – capital will flee all but the most promising projects, which should keep production in line with demand and conserve the resource for future use. But a larger point needs to be made – this is the Shale Age, but that does not mean every (or even most) shale projects will be profitable for investors.