As the world reels from an energy crisis that is resulting in skyrocketing gas and oil prices, there is debate about solutions within the United States.
Pennsylvania is the second largest producer of natural gas in the country, rivaled only by Texas. The state produces 20% of the nation’s energy supply and northcentral Pennsylvania is no stranger to the well pads that began dotting the countryside during the state’s 2008 drilling boom.
As the uncertainty brought on by the war in Ukraine rages on, many countries have been forced to evaluate new forms of energy development.
A steady price increase
Matthew Henderson, owner of Henderson Consulting, works closely with many natural gas companies in Pennsylvania. The rising energy crisis, while arching sharply upward when Russia invaded Ukraine, had already been steadily increasing for the past year.
In 2021, gas prices rose by over 58%, according to the Pew Research Center. In November 2020, prices were $2.20 per gallon on average and, in December 2021, prices rose to $3.49 per gallon.
According to Henderson, these increases are due to a variety of factors that are more domestic in nature.
“In the U.S., we store the gas, but it is less than usual. When you have less in storage, the price of gas goes up,” Henderson said.
Data shows that U.S. gasoline production did not increase as much as consumption did in 2021, contributing to gasoline inventory withdrawals of 25.5 million barrels (10%) during the year.
Henderson added that major investors in the gas and oil industry, who have historically taken most of their earnings and reinvested them into the market, are now taking more revenue. This is reducing the revenue return on sales, and companies are increasing the price to compensate.
Regulations on the energy industry also make increasing gas development more difficult.
“Policies are not encouraging more domestic development on a natural and state level,” Henderson said.
For example, he pointed out that while the state provides 20% of the nation’s natural gas supply, this could be increased by an additional 7% if pipeline projects are approved.
Another 7%
According to Henderson, Pennsylvania already produces the max amount of natural gas that it is able to with the current infrastructure.
“There are six pipeline projects on the East Coast that have been canceled because of regulations that would move 7 billion cubic feet of gas per day,” Henderson said. “We would be able to produce another 7% of the nation’s supply.”
Since Russia’s invasion of Ukraine, gas and oil prices have skyrocketed, but Henderson said the U.S. receives less than 10% of its energy supply from Russia and therefore the fluctuating prices are due to uncertainty in the markets rather than a lack of energy coming into the country.
Countries in Europe that receive the majority of their energy supply from Russia are seeing a much more significant impact, he said.
Over the past month, homes that are heated by oil have seen a drastic increase in costs, while homes heated by natural gas have only seen marginal fluctuation, Henderson said.
While heavy truck traffic and drilling sounds don’t dominate the region as much in recent years, Henderson said the natural gas industry is producing more energy now than it ever has before.
“There is still a significant investment being made in this area,” he said, adding that over $20 million in investments have been made in the state.
An environmental question
Over the years, drilling has become more efficient, allowing companies to place multiple pipes on one drill pad, bringing up more gas with less infrastructure.
The most prevalent criticism of drilling for natural gas is the environmental impact. While it is one of the most environmentally friendly fossil fuels, environmentalists say it “emits a large amount of carbon into the atmosphere in the form of both CO2 and methane.”
According to Henderson, since 2008, drilling methods have seen many technological advances, allowing the industry to produce more with less impact.
Henderson also is skeptical about calls to transition the entire country away from fossil fuels to renewable forms of energy, such as solar or wind power.
“The cost would be astronomical,” he said. “The technology is not there for renewables at this point.”
