Is Shale Drilling Really the Answer to Lower Natural Gas Prices in North America

Is Shale Drilling Really the Answer to Lower Natural Gas Prices in North America

In recent years the discovery of new shale gas deposits and new drilling technology, such as hydraulic fracturing and horizontal drilling, have dramatically increased the United States natural gas reserves. The dramatic economic success of shale drilling has spurred similar development in other countries and helped decrease and stabilize the cost of natural gas in the United States.

However, the picture may not be as rosy as it seemsMany of the the nation's leading independent energy suppliers, caution there are multiple factors which can still impact the price of natural gas, and in turn, the price of electricity production as well. Electricity prices and gas prices are related in the sense that much of the electricity we consume is created by natural gas powered electric plants. Therefore if the price of natural gas rises there is a direct correlation to electric rates climbing as well.

While the shale gas reserves have represented a tremendous new source of natural gas for this country, it is important we do not become too optimistic. A recent decline in conventional well production, an increasing international demand for natural gas and the high cost of rig operation have led to a delicate balance between supply and demand. This balance is sure to eventually cause gas prices to rise as supply goes up and the lack of production continues. As well as cost of production rising which is usually a sign of that cost being passed on to the consumer.

The discovery of new shale gas deposits in states such as Pennsylvania and Texas have been financial windfalls for those communities and caused many people to be highly optimistic regarding the cost of natural gas in the future.

Although shale drilling has definitely represented an enormous new resource for natural gas, we still must not lose sight of continuing to search for more environmentally sustainable sources of energy. Not only are there critical factors which can drive up the cost of gas but that in turn can have a negative impact on the cost of electricity as well.

In its 2011 Annual Energy Outlook, the US Energy Information Administration doubled its estimate of technically recoverable shale gas reserves and projected that by 2035 shale production will represent 45% of total US gas production.

Let's also talk about what shale gas actually is. Oil shale is basically a synthetic gas mixture which is produced by oil shale pyrolisis. There does not seem to be an exact formula for this type of gas It seems to be composed of methane, hydrogen, carbon monoxide, carbon dioxide, nitrogen and different types of hydrocarbons. This type of gas has become an important source of gas for North America as well as Canada, Asia, and Europe.

So is shale oil the answer to natural gas production. At this point it would seem that this type of gas is an up and coming energy resource that has the potential to supply the world with energy for year to come. We depend largely on fossil fuels to produce energy and this type of gas is another solution to our energy supply demands. As the world grows larger and larger in population the problem of creating reliable energy sources is an ever growing concern as well.

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