Supply is up.
Prices are down 75% from the 2008 peak.
WSJ/CADDO PARISH, La. -- A massive natural-gas discovery here in northern Louisiana heralds a big shift in the nation's energy landscape. After an era of declining production, the U.S. is now swimming in natural gas.Even conservative estimates suggest the Louisiana discovery -- known as the Haynesville Shale, for the dense rock formation that contains the gas -- could hold some 200 trillion cubic feet of natural gas. That's the equivalent of 33 billion barrels of oil, or 18 years' worth of current U.S. oil production. Some industry executives think the field could be several times that size.
Huge new fields also have been found in Texas, Arkansas and Pennsylvania. One industry-backed study estimates the U.S. has more than 2,200 trillion cubic feet of gas waiting to be pumped, enough to satisfy nearly 100 years of current U.S. natural-gas demand.
The discoveries have spurred energy experts and policy makers to start looking to natural gas in their pursuit of a wide range of goals: easing the impact of energy-price spikes, reducing dependence on foreign oil, lowering "greenhouse gas" emissions and speeding the transition to renewable fuels.
Just three years ago, the conventional wisdom was that U.S. natural-gas production was facing permanent decline. U.S. policy makers were resigned to the idea that the country would have to rely more on foreign imports to supply the fuel that heats half of American homes, generates one-fifth of the nation's electricity, and is a key component in plastics, chemicals and fertilizer.
But new technologies and a drilling boom have helped production rise 11% in the past two years (see top chart above, data here). Now there's a glut, which has driven prices down to a six-year low (see bottom chart above) and prompted producers to temporarily cut back drilling and search for new demand.
The natural-gas discoveries come as oil has become harder to find and more expensive to produce. The U.S. is increasingly reliant on supplies imported from the Middle East and other politically unstable regions. In contrast, 98% of the natural gas consumed in the U.S. is produced in North America.
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