NATURAL GAS, THE UNAPPRECIATED ECONOMIC STIMULUS

We all readily notice the drop in gasoline prices, each time we go to the pump. It's a big deal. It's a big deal especially for low wage earners, for whom the recent drop means another $75 to $100 in fuel savings per month.
This makes it a big deal for the economy.

Natural gas is an ingredient used to make fertilizer, antifreeze, plastics, pharmaceuticals and fabrics. It is also used to manufacture a wide range of chemicals such as ammonia, methanol, butane, ethane, propane and acetic acid.  

Many manufacturing processes require heat to melt, dry, bake or glaze a product. Natural gas is used as a heat source in making glass, steel, cement, bricks, ceramics, tile, paper, food products and many other commodities. Natural gas is also used at many industrial facilities for incineration. 

We as consumers don't necessarily readily appreciate the savings in nearly everything we buy, at the grocery store or the shopping mall, as a result of low natural gas prices, because the benefit can be obscured by sheer complexity, or it may be that the effect of low natural gas prices is in many cases are merely off setting other upward pressures on pricing. Tremendous benefit, none the less. 

I've been watching natural gas prices for years now. Six years ago, when natural gas was pricing at around $7 per mmBTU, I spent good money to convert my home heat to heat pumps. Seemed brilliant at the time. For the last few years, prices have held fairly steady at around $4, that is, until the fracking revolution in the US (thank God for private property laws) began to flood the US market with both oil and natural gas. The price of natural gas today sits at $2.24 per mmBTU, an unprecedented development. Look for it to spike a bit in November and December, as it always does, but we're probably looking at $2 or so for the foreseeable future.

This is a huge development for every man, woman, child, manufacturer, and retailer in the country. Huge. It is estimated that for every 10 cent drop in natural gas prices, $300 million accrues to the listed companies on the DOW. So the drop from $4.50 to where it is today means a whopping 23 times that amount, or around $65 billion to those firms alone, and the DOW doesn't comprise all enterprises in the country that will benefit.

The price of natural gas in the rest of the world has remained a bit above that prices in the US. Because Russia dominates natural gas production outside of the US, many European firms have decided to manufacture in the US, principally because of the price of natural gas. No small benefit this, and it is just beginning.

I'm not against coal at all, as a matter of fact, I'm for coal if only because Barack Obama is trying to destroy the coal industry. But natural gas is now competing with coal as a feedstock for electric power generation. And it's cleaner. 

The American fossil fuel industry has been under constant assault by this administration, and by extension, so has the American economy. It should be clear by now that this was a deliberate attempt to weaken America, by an anti-american who sits in the White House. He would not approve the Keystone pipeline, Obama would not allow drilling on our shores or on our public lands. But the fracking revolution took place on private property, with leases already in place, and he could do nothing about it. It must grind him that capitalism still exists in this country. He must feel the private sector is like some weed in the garden that gets lopped off, uprooted, snipped and sprayed, and it still won't die. 

I'm optimistic now that we'll make it to the end of this particular emperor's reign, and if American capitalism survives, we can thank hydraulic fracking, horizontal drilling, and private property laws.