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Natural Gas Economics: An Update

Professor Ferdinand E. Banks
ferdinand.banks@telia.com
November 20th, 2015

In my first energy economics textbook, ENERGY ECONOMICS: A MODERN INTRODUCTION (2000), the title of the chapter on natural gas was A Fuel of the Future: Natural Gas. The purpose of that chapter (and some of the remainder of the book) was to convince readers that when oil and coal were on the downward slopes of their cumulative production curves – i.e. annual output was declining – natural gas would still be going strong. My goal was to demonstrate some useful aspects of economics to students and others, and my arguments apparently made sense to many readers. Unfortunately, all of them no longer make sense to me.

In the book I often refer to as Energy Economics 101, David Goodstein – professor of thermodynamics at the California Institute of Technology – suggests that the beautiful natural gas future I had in mind, but did not specify in detail, is unlikely to last much past the middle of the present century, even though shale natural gas (and oil) have made a dramatic appearance in the United States (U.S.), and large shale reserves are to be found elsewhere. (This might also be the place to note that natural gas or oil ‘reserves’ are the amount of these resources that supposedly can be profitably extracted given current technological limitations.)

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Professor Ferdinand E. Banks
ferdinand.banks@telia.com
November 20th, 2015