The quick turnaround in U.S. natural gas supplies is another example of energy markets working as has been the case in the regional transmission area for electricity, FERC Commissioner Marc Spitzer said Tuesday at an energy conference in San Francisco, “Energy in California.” Technology advances and the right government policies have made it easier for the gas industry to respond quickly to price signals in recent years, Spitzer said.
“It is a case of markets working. If you look at when prices for gas went up, sending signals to the market, and the use of technological innovations of horizontal drilling and fracing, it has all allowed nonconventional gas that wasn’t thought to exist in 2002 to put us in a position where we are now awash in gas supplies,” Spitzer said.
Further helping the markets work has been government’s response in this case in the 2005 and 2007 federal energy laws, he said. He thinks that incentives from the Federal Energy Regulatory Commission (FERC) have created a lot more merchant-priced gas storage. “Europe has no storage capacity so when the prices go up, they are hurt by having no ability to put $2 gas in the ground and pull it out when prices are $6.”
Repeating his assertion that FERC has approved more miles of interstate gas pipelines in the last four years while he has been on the Commission than it did in the previous 15 years, Spitzer said that thanks to the 2005 Energy Policy Act the federal regulators also have sited a lot of new storage.
“This is the perfect convergence of changes in law creating market signals and infrastructure being approved and getting built. With this storage, liquefied natural gas (LNG) becomes very valuable in the United States because we have the capacity to take supplies when prices are low. At those times, this is the only place that global LNG can go,” Spitzer said. “We have the most liquid, transparent and consumer-friendly natural gas markets in the world.”
Ultimately, Spitzer said, the market works even though at times in recent years people have “lost faith in the gas markets.” Since natural gas was deregulated in the United States in 1982, he said American consumers have “saved billions of dollars.”
The regional electric transmission markets are developing the same consumer savings as the markets mature, Spitzer said. “They are another example of markets working.”
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