A recent Bloomberg article examined the paradox of producing too much natural gas to be able to transport. Earlier this week, natural gas in the Permian Basin was trading between 20 and 70 cents, compared to U.S. futures of $5.20 and European prices of $28. Then, yesterday, West Texas gas prices plunged negative, something that has not happened in over two years. The recent price collapse is more indicative of our country’s shortcomings than its successes.
This crater is not wholly because of an abundance of resources, but more importantly, a lack of infrastructure to support getting the energy to market and consumers. The irony here is that without the means to transport, natural gas producers will likely need to be flared, or in other words, burning natural gas after it is extracted. So even though the entire world, especially here at home, is in the midst of an energy crisis, producers will need to waste excess gas rather than bring it to market.
Increasing natural gas and oil production is undoubtedly a good thing, especially as demand over the past year has surpassed pre-pandemic levels. However, without the means to adequately transport these resources due to inadequate pipeline infrastructure, this natural resource will be wasted as it sits unable to be shipped to consumers.
Energy projects have become increasingly polarizing over the last decade. Lawmakers in D.C. and federal regulators must stop playing politics with energy and remove burdensome regulations that have hamstrung energy developments. If the U.S has prioritized more pipeline projects over the last couple years, West Texas natural gas could be playing a much larger role in helping to alleviate the coming energy crisis in Europe and Asia.
As prices for heating and electricity skyrocket both abroad and across the country this coming winter, remember that our excess of natural gas from the Permian Basin could be making a huge difference if only decision-makers had supported, developed, and built more pipeline capacity.