Why is Natural Gas prices so high when most of it is obtained domestically?

Question

Like Petroleum prices are understandable because 90 % is imported and its at the mercy of OPEC. But NG should be under domestic free trade and should find its own price.

Answer 1

Natural gas prices are high because there is a tight balance between accessible supply and demand, especially during summer and winter temperature extremes.  The high price of oil also has an impact because some customers can switch from oil to gas, thus increasing the demand for gas.  As far as converting from natural gas to electricity as the answer, that would be the absolute wrong thing to do in almost all areas of the country.  When you use natural gas for space and water heating in your home, you are directly using a clean-burning fuel as opposed to the indirect conversion of less environmentally friendly fuels, such as coal, into electricity.  So even despite the current higher natural gas prices, natural gas continues to be your best energy value.  For example, even in the Midwest with its lower electricity prices, the cost for heating with electricity is more than twice the cost for natural gas.  In addition, using natural gas is a much better choice for the environment as it leaves less than half the carbon footprint as compared to electricity.  You can find out how natural gas compares to electricity by using our new Cost and Emissions Calculator at http://info.centerpointenergy.com/calcul...

Doug Peterson, director of Northern Region Marketing and Sales-CenterPoint Energy

Answer 2

That is exactly why the prices are so high. Whether it is oil, natural gas, or any other product that is fairly cheap to transport - as long as the producers are free am free to sell it to whomever they want, the price is global.

If I am selling a product, I'm interested in maximizing my profit so I'll sell to the highest bidder, wherever s/he is.

That means that people here have to be willing to pay as much as people from elsewhere who want my product.

Of course, the government could restrict exports (which many governments have started doing for food), charge export taxes (which make the product somewhat more expensive to buyer outside the country), etc.

But for all commodities for which transportation costs (including spoilage) are relatively low, the free market is the global market, with a global price.

This is true of oil as well. Most of the oil that the U.S. imports does NOT come from OPEC. More comes from Canada and Mexico.

http://www.eia.doe.gov/pub/oil_gas/petro...

https://www.cia.gov/library/publications...

But because all oil producers sell at the highest price they can get, even oil that can be produced at $20/barrel still gets sold for $140/barrel because that's what the market will bear. (If you were selling something that you owned, wouldn't you look for the highest price you could get for it?)