WSJ: Why Obama’s Call For Expanded Gas Drilling Won’t Be Answered

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Pres­i­dent Obama deliv­ers his State Of The Union Address

The Wall Street Jour­nal is pro­vid­ing a real­ity check to Pres­i­dent Obama’s call for expanded nat­ural gas drilling.

The paper’s take: that sim­ply isn’t going to hap­pen as long as nat­ural gas prices stay at their cur­rent low lev­els. (Here in Penn­syl­va­nia, we’ve already seen Chesa­peake and Con­sol scale back their Mar­cel­lus Shale drilling operations.)

As we’ve reported, cheap gas prices are great for con­sumers. The WSJ explains why they’re curb­ing energy com­pa­nies’ enthu­si­asm for more drilling:

The suc­cess of the explo­ration and pro­duc­tion, or E&P, sec­tor in devel­op­ing America’s uncon­ven­tional gas has crushed prices. This is good for bill-paying vot­ers, so the White House would like to encour­age it. Prob­lem is, what is really needed is more demand. The oil price is now about 40 times the price of gas. On an energy-equivalent basis, oil should be only six to 10 times higher. The mar­ket is say­ing use less oil and more gas.

Unfor­tu­nately, that is eas­ier said than done. The antic­i­pated switch from coal-fired elec­tric­ity to more derived from gas is prov­ing grad­ual. Increased gas exports, if they hap­pen, remain years off. Con­vert­ing vehi­cles to run on nat­ural gas is another strat­egy. But Joe Petrowski, chief exec­u­tive of fuel dis­trib­u­tor Gulf Oil, esti­mates there might be an extra 300,000 gas-fueled vans and trucks on the road this year, boost­ing gas demand by just 2%.

If gas is to strengthen any­time soon, it won’t be due to surg­ing demand, but reduced supply.

How impor­tant are gas prices to energy com­pa­nies’ health? Our friends at StateIm­pact Texas dug up a chart show­ing how Chesapeake’s stock prices rise and fall along­side nat­ural gas prices.