Gas Crisis Forum: Is It Real, or Is It Hype?

Chicken Little has cornered the market on gas price doom and gloom, but the data is inconsistent on whether high gas prices are here to stay.

A near-universal consensus of alarm appears to be emerging concerning North American gas supply adequacy. The steady march upward of spot gas prices and NYMEX futures over the past year confirms this coalescence of market sentiment. Way back in June 2002, you could still buy Rocky Mountain wellhead production for about $1.25/MMBtu, although Eastern U.S. markets had already exceeded $3.00/MMBtu.

Today, that Rocky Mountain gas supply would cost you about $5.00/MMBtu, while Eastern supplies sell for well over $6.00/MMBtu. Storage inventories were blown down to record levels during the past heating season, gas producers continue to issue dire warnings about their ability to replace dwindling deliverability, and private and public prognosticators predict many years of supply curtailment and concomitant high prices. Both investment banking firms and brokerage houses are thumping their drums in unison on the latest hot sector as regulators and politicians notice and begin to address the reported problem in their individual, often heavy-handed ways.