NEW YORK-The price of nat­ur­al gas in the US is plum­met­ing at a pace that has caught even the ex­perts off guard. A 35 per cent col­lapse in the fu­tures price over the past year has been a boon to home­own­ers who use nat­ur­al gas for heat and ap­pli­ances and to man­u­fac­tur­ers who pow­er their fac­to­ries and make chem­i­cals and ma­te­ri­als with it. The coun­try is flush with nat­ur­al gas as a re­sult of new drilling tech­niques that have en­abled en­er­gy com­pa­nies to tap vast sup­plies that were out of reach not so long ago. The coun­try's nat­ur­al gas sur­plus has been grow­ing even as the coun­try burns record amounts.

This win­ter's warm weath­er slowed the growth in de­mand, how­ev­er, and cre­at­ed a glut. In the North­east, De­cem­ber was the fourth warmest in the last 117 years. Win­ter sup­plies are 17 per cent above their five-year av­er­age. The nat­ur­al gas fu­tures price fell 13 per cent last week, to US$2.67 per 1,000 cu­bic feet (28.3 cu­bic me­tres). That's the low­est win­ter-time lev­el in a decade. "The mar­ket has been over­whelmed with gas," says An­tho­ny Yuen, a com­modi­ties an­a­lyst at Citibank. He and oth­er an­a­lysts ex­pect the price to av­er­age near US$3 for 2012. If the weath­er stays mild, the price could dip be­low US$2, a lev­el not seen since 2002.

Cheap nat­ur­al gas main­ly a good thing

More than half of US house­holds use nat­ur­al gas for heat, and a quar­ter of the na­tion's elec­tric­i­ty is made from it. Falling heat­ing and elec­tric costs are off­set­ting the im­pact of high gaso­line prices and en­abling fam­i­lies and small busi­ness­es to spend on oth­er things. Res­i­den­tial gas and elec­tric cus­tomers are sav­ing rough­ly US$200 a year, ac­cord­ing to a study by Nav­i­gant Con­sult­ing. For com­pa­nies that make plas­tics, fer­tilis­er and oth­er chem­i­cals de­rived from nat­ur­al gas, the falling prices are noth­ing short of a wind­fall. The same goes for mak­ers of prod­ucts from steel to bricks to beer. All use a lot of nat­ur­al gas to heat their fur­naces. US man­u­fac­tur­ers are be­com­ing more com­pet­i­tive glob­al­ly as a re­sult of the coun­try's cheap nat­ur­al gas, in­dus­try of­fi­cials say.

Some in­dus­tries aren't cheer­ing, though. With elec­tric­i­ty prices falling, the prof­its of all elec­tric pow­er pro­duc­ers-whether they re­ly on coal, nu­clear or wind-are shrink­ing. Com­pa­nies that drill sole­ly for nat­ur­al gas are earn­ing less these days, too. That's prompt­ing some to hunt in­stead for oil, whose price is near US$100 a bar­rel. Still, drillers aren't re­duc­ing nat­ur­al gas pro­duc­tion as much as they would have dur­ing pre­vi­ous pe­ri­ods of low prices. They've found ways to pro­duce the fu­el at much low­er cost so they can be prof­itable at much low­er prices. And, in many cas­es, nat­ur­al gas is a byprod­uct of oil drilling, which is so prof­itable that com­pa­nies are go­ing af­ter every bar­rel they can find. The ben­e­fit of falling nat­ur­al gas prices to home­own­ers is not as big as a ma­jor drop in oil and gaso­line prices would pro­vide. The av­er­age house­hold's an­nu­al gaso­line bill is about US$4,000, rough­ly dou­ble the av­er­age an­nu­al gas and elec­tric bill.

Al­so, the fu­el cost is on­ly half of a cus­tomer's bill. The rest is trans­mis­sion and de­liv­ery charges, which don't change along with fu­el prices. Home­own­ers are pay­ing US$10.18 per 1,000 cu­bic feet of gas on av­er­age, in­clud­ing trans­mis­sion and de­liv­ery charges, ac­cord­ing to the En­er­gy In­for­ma­tion Ad­min­is­tra­tion. Over a year, a cus­tomer will burn an av­er­age of 75,000 cu­bic feet (2,124 cu­bic me­tres), or about US$760 worth. The mul­ti-year drop in nat­ur­al gas prices caught most in­dus­try ex­perts by sur­prise. In the mid­dle of the last decade, nat­ur­al gas looked to be in short sup­ply. Pro­duc­tion in the US was slow­ing, im­ports from Cana­da were ris­ing and plans for im­port­ing liq­ue­fied nat­ur­al gas from the Mid­dle East and else­where were drawn up.

Nat­ur­al gas fu­tures hit near­ly US$15 in 2005. Chem­i­cal and met­als man­u­fac­tur­ers were shut­ting US fac­to­ries and mov­ing over­seas, where gas was abun­dant and cheap­er. Farm­ers in need of fer­tilis­er were turn­ing to in­ex­pen­sive im­ports from Cana­da, Trinidad and Asia. But over the next few years, drillers per­fect­ed meth­ods first tried in 1981 that now al­low them to prof­itably ex­tract gas trapped in shale for­ma­tions-lay­ers of fine-grained rock that in some cas­es have trapped an­cient or­gan­ic mat­ter that has cooked in­to oil and nat­ur­al gas. En­gi­neers com­bined the abil­i­ty to drill hor­i­zon­tal­ly in­to shale with a tech­nique called hy­draulic frac­tur­ing. Mil­lions of gal­lons (litres) of wa­ter, sand and chem­i­cals are pumped in­to wells to break rock and cre­ate es­cape routes for the gas. In do­ing so they un­locked nat­ur­al gas de­posits deep un­der­ground across the East, South and Mid­west that are large enough to sup­ply the US for decades.

This even­tu­al­ly turned the short­age in­to a glut, and re­versed the for­tunes of some in­dus­tries. An am­mo­nia plant owned by CF In­dus­tries in Don­ald­sonville, Louisville, that was shut by its for­mer own­er in 2004 is run­ning again. Steel mak­er Nu­cor Corp is build­ing a fac­to­ry in Louisiana; Shell Oil Co is plan­ning a petro­chem­i­cal plant in Ap­palachia; and Dow Chem­i­cal is build­ing a type of chem­i­cal feed­stock plant it hasn't built in the US since 1995.

AP