It's why we have to reduce demand as well, with radical efficiency.
It's really warm in Europe and parts of North America this winter, so people are burning less natural gas to keep warm. Meanwhile, natural gas production has never been greater, thanks to fracking and new Liquid Natural Gas (LNG) infrastructure that turns it into a global commodity. Toss in the Coronavirus that has hammered Chinese demand.
It is all turning into a natural gas feedback loop, according to Nick Cunningham in Oilprice.com.
“LNG exporters desperately need cold weather in Europe to draw down inventories and provide more breathing room this summer,” Bank of America warned. But that is not happening. Europe just saw its warmest January on record, depressing gas demand. Fossil fuels are driving climate change, so it’s rather ironic that higher temperatures are now battering gas markets.
It’s all combining to create a “gasmaggedon,” according to Bank of America Merrill Lynch. “We are now more than halfway through the winter, and thus far Mother Nature has not been kind to natural gas prices,” analysts at the bank wrote.
According to Bloomberg, it's getting so bad that it won't be worth exporting; the price of gas is too low to justify liquifying and shipping it. And the industry can't shut it off because it's a byproduct of shale oil production.
“The industry is a victim of its own success,” said Devin McDermott, an analyst at Morgan Stanley. “You don’t just have oversupply in the U.S., you have oversupply in Europe, oversupply in Asia, and really oversupply across the globe.”
This has been the situation for years and it creates a real problem for those of us who want to electrify everything: gas keeps getting cheaper, and electricity keeps getting more expensive. I was criticized recently for still having a gas boiler heating my hot water and radiators, but in a big hundred-year-old house, the cost of heat pumps was prohibitive a few years ago when I renovated, both in upfront hardware costs and operating costs, because the COP (Coefficient Of Performance) drops significantly in cold weather. Of course, if we keep having winters like this one where it has rarely dropped below O°C, the economics of air source heat pumps change.
But in a few years, I may not have a choice; bans on gas hookups are spreading across North America, much faster than anyone expected. According to the New York Times,
Even environmentalists are surprised, said Rob Jackson, a professor at Stanford University who leads the Global Carbon Project. He said that “dozens for sure, likely hundreds” of jurisdictions would pass gas bans and pro-electric legislation this year, though lawsuits challenging them may also proliferate.
They will likely also get a whole lot of challenges from homeowners who may be paying a lot more to heat their homes than their neighbours. This is why I keep saying we have to reduce demand at the same time as we electrify everything. If jurisdictions are going to legislate the elimination of gas in new housing, they should also legislate the demand side with Passivhaus levels of insulation and airtightness. Then nobody would even notice their electric bills, and gas would be left in the ground, where it belongs.