Consumers Heating Homes With Gas Get A Break

The price of gasoline may be rising, but the price of gas - natural gas - is moving in the opposite direction, and moving fast.

The price of natural gas is down more than 30 percent over the last year and recently hit a two-year low, meaning utilities are paying less for the fuel they sell to consumers to heat their homes and power appliances like stoves and water heaters. If your gas bill hasn't gone down recently, it's probably because your supplier is pocketing the difference.

Why are natural gas prices moving in the opposite direction of oil prices, and moving down so quickly? Yes, the winter until very recently has been mild, reducing demand. But this price action probably has more to do with supply than demand.

Fracking

The U.S. is extracting huge amounts of new natural gas using the fracking process. This allows drillers to remove gas trapped in shale deposits in New York, Pennsylvania, Ohio, North Dakota and other areas of the upper Midwest.

Demand has actually risen over recent months but that hasn't had any impact on the price. Even though consumers are paying more and more for fuels to drive their cars, falling natural gas prices could help offset the overall impact of that, helping to grow the economy.

In addition to consumers who use natural gas for heat, many businesses also use it, helping them to control their costs. Electric utilities that use natural gas to fire their generators will also benefit and should be able to keep electricity rates in check.

Gas states get a lift

The states where most of the natural gas mining is taking place are also benefiting economically from all the activity. It's created a large number of jobs, for example, in North Dakota, where not only gas is being pumped from the ground, but increasing quantities of oil, extracted from the soil. The unemployment rate in that state is under four percent.

Probably the best news for the economy when it comes to natural gas is its location; the United States. The U.S. must increasingly import oil, sending dollars out of the country. Domestic natural gas helps the trade deficit.

The U.S. could benefit even more if it could export more gas to other parts of the world, where the price is higher. But industry analysts say that may be years away, since the infrastructure of most ports is not set up to load liquified natural gas aboard tankers.