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Marcellus Production Helps Reduce Natural Gas Prices in 2012

The average wholesale natural gas price fell by 31 percent in 2012 compared to the previous year, down from $4.02 per million British thermal units in 2011 to $2.77 per MMBtu at the main trading location in Louisiana. The U.S. Energy Information Administration reports on Tuesday that last winter’s mild weather, combined with increased production of Marcellus Shale natural gas, as well as shale gas production in Texas, forced a significant drop in price. The price of natural gas fell despite a shift in electricity generation from coal to natural gas.

“Average annual prices for natural gas fell 30%-34% at 5 of 10 major trading points in 2012 compared to 2011. An increased supply of natural gas significantly contributed to higher inventories and lower prices nationwide.”

The largest drops in price occurred at the trading locations closest to the Marcellus Shale. Average prices at Transco Zone 6 in New York, dropped by 38 percent, and by 37 percent at TCO Appalachian Pool on the Pennsylvania Maryland border. Prices for natural gas typically spike during cold winter months and hot summer weather.

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