Financial Times: EFH’s future is clouded by shale

Energy Future Holdings looks likely to become one of the biggest casualties of the boom in shale gas, which has transformed the US energy industry.

US producers have applied technologies such as horizontal drilling and hydraulic fracturing – in which huge volumes of water and chemicals are injected into rock at high pressure – to unlock gas reserves trapped in dense shales from Texas to Pennsylvania. The effect has been revolutionary: US domestic production of gas has grown nearly 30 per cent in the last five years. 

That has sharply depressed the price of gas, which fell from a high of $13.69 per million British thermal units in 2008 to a low of $2.23 on January 23. Natural gas for April delivery was trading at $2.375 per MMBTU in New York on Monday.

In large parts of the US, natural gas is the fuel that sets the market price of electricity. As a result, electricity prices have fallen sharply too, dropping by 50 per cent on average since the final quarter of 2008, according to research by Standard & Poor’s.

That is bad news for utilities that generate electricity from coal, rather than gas, since the price of coal has not fallen the way gas prices have. Indeed, in some parts of the country it’s rising.  MORE (Registration required)