Trends in Natural Gas Prices
The chart shows a 75-year history of annual United States natural gas production and average wellhead prices from 1930 through 2005. Prices paid by consumers were increased above those levels by processing and distribution costs. Production is shown in billions of cubic meters per year, and average wellhead pricing is shown in United States dollars per thousand cubic meters, adjusted to spring, 2006, by the U.S. Consumer Price Index.
Through the 1960s the U.S. was self-sufficient in natural gas and wasted large parts of its withdrawals by venting and flaring. Gas flares were common sights in oilfields and at refineries. U.S. natural gas prices were relatively stable at around (2006 US) $30/Mcm in both the 1930s and the 1960s. Prices reached a low of around (2006 US) $17/Mcm in the late 1940s, when more than 20 percent of the natural gas being withdrawn from U.S. reserves was vented or flared.
While supply interruptions have caused repeated spikes in pricing since 1990, longer range price trends respond to limitations in resources and their rates of development. As of 2006 the U.S. Interior Department estimated that the Outer Continental Shelf of the United States held more than 15 trillion cubic meters of recoverable natural gas, equivalent to about 25 years of domestic consumption at present rates. Total U.S. natural gas reserves were then estimated at 30 to 50 trillion cubic meters, or about 40 to 70 years consumption. The new technologies of hydraulic fracturing and horizontal drilling have increased these estimates of recoverable reserves to many hundreds of trillion cubic feet. Hydraulic fracturing has reduced the Henry Hub spot price of natural gas considerably since 2008.
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