In 2022, the price of natural gas in Europe reached 40.3 constant U.S. dollars per million British thermal units, compared with 6.4 U.S. dollars in the U.S. The steep increase in prices is due to the fallout from the energy supply shortage which began in 2021 and further constraints resulting from the Russia-Ukraine war. Since 1980, natural gas prices have typically been higher in Europe than in the United States and are expected to remain so for the coming two years. This is due to the U.S. being a significantly larger natural gas producer than Europe.
What is natural gas and why is it gaining ground in the energy market?
For millions of years, a combination of decayed plants and animals has been trapped beneath sand, silt, and rock. Over time, pressure and heat changed some of this organic material into tiny bubbles of odorless gas. This gas is commonly burned in power plants with combustion turbines that generate electricity or used as a heating fuel. Given the fact that the world’s energy demand continues to grow, natural gas was seen by some industry leaders as an acceptable "bridge-fuel" to overcome the use of more emission-intensive energy sources such as coal. Subsequently, natural gas has become the main fuel for electricity generation in the U.S., while the global gas power generation share has reached 22 percent.
How domestic production shapes U.S. natural gas prices
The combination of hydraulic fracturing (“fracking”) and horizontal drilling can be regarded as one of the oil and gas industry’s biggest breakthroughs in decades, with the U.S. being the largest beneficiary. This technology has helped the industry release unprecedented quantities of gas from deposits, mainly shale and tar sands that were previously thought either inaccessible or uneconomic. It is forecast that U.S. shale gas production could reach 33.67 trillion cubic feet in 2050, up from 1.77 trillion cubic feet in 2000.
