Now, much of U.S. production comes from on-shore formations that are more susceptible to cold, ice and snow. Wells that are not designed for such extreme conditions can freeze, halting production.
“Now the threat to production is when demand is at its highest,” Schork says.
Also, electric utilities have for several years been switching to cheaper natural gas for power generation. And new pipelines aren’t being built fast enough to deliver all the gas required at times of high demand. That can lead to regional shortages that send prices skyrocketing.
In some producing regions in Pennsylvania gas was selling for below national benchmarks Friday, But closer to East Coast cities it was selling for 10 times those benchmarks because producers couldn’t get their gas into packed pipelines, according to Citibank energy analyst Anthony Yuen.
When the Calvert Cliffs Nuclear Station in Maryland shut down earlier this week because of an electrical problem brought on by snow and ice, power generators across the East Coast scrambled to replace the lost power by cranking up natural gas-fired plants. That sent natural gas prices for immediate delivery, known as the spot price, to a record $120 per 1,000 cubic feet in some markets on the East Coast. To put that in perspective, that’s equivalent to oil at more than $700 per barrel.
Analysts say there is plenty of gas to replenish supplies, and drillers will likely ramp up production so they can fetch prices they haven’t seen since June of 2010.
That could push prices back down somewhat in the coming weeks. If, that is, the weather warms up later in February and March. If it’s still cold when base