Natural gas prices in Texas are at their lowest – Quartz

In the vast Permian Basin, in western Texas, at the junction of the Waha Pipeline, 120 km south of Midland, buyers and sellers come together to sell huge quantities of natural gas, destined to heat homes, produce electricity and make chemicals.

Lately, however, there is a problem. Wholesalers buy oil, but they do not consume natural gas, a natural by-product of the oil drilling process. Overproduction of oil, coupled with an existing pipeline for maintenance purposes, has left oil producers with more gas than they know what to do. The oversupply has had a negative effect on the prices of this natural gas, so that the hub sellers resort to paying customers with unused spare capacity to withdraw their business.

According to Reuters, a combination of equipment problems and weak demand drove down gasoline prices in West Texas, reaching a record low of $ 3.38 per million British thermal units Wednesday, April 3, after nearly two weeks of negative prices. Oil producers are reluctant to burn natural gas – no more than they should – it is a noisy place, harmful to the environment and potentially detrimental to safety. Failure to do so, coupled with an inability to sell it, has a literal cost.

Under normal circumstances, gas passes through the El Paso pipeline to compressors located in New Mexico. But equipment problems at two of these stations have limited the amount of gas that can be treated. Both should be put back into service by the end of the week. It may be too late, as the fall in demand for heating gas, as winter gives way in the spring, has created a market for buyers, who are turning more and more to energy. wind turbine.

As long as the United States relies on oil, producers will have an excess of natural gas. The planned pipelines should help manage the extraction process, but they will not be completed until the end of the year. Even then, there will always be more gas than sellers know what to do, which could create an environment in which the most lucrative part of the gas will simply remove it.