It is well understood that governments attempt to manipulate prices and we muse whether such an attempt may be under way in natural gas. The price of natural gas acts suspiciously to us, much as oil price did during 1998 when it hit lows most likely never to be seen again. Our political leaders made no bones about manipulating natural gas price from the 1950s through the 1980s, when well-head price controls were the law of the land in the U.S.
Today we see a common effort by China and the U.S. to hold down natural gas by the promotion of coal in electrical generation. Influential global power strategists in the two countries may find common cause in holding down the economic development of rival Russia, the world’s largest natural gas producer. For its part, China has stringent price controls on its cleanest fuel while it pollutes the world with massive coal burning. China also appears to be holding Russia’s feet to the fire in negotiating a price for natural gas deliveries from the north.
The U.S. is developing rules to curb carbon dioxide emissions that would give a pass to the largest emitter, coal, and instead further penalize cleaner natural gas and oil. U.S. industrial users lobby to restrict the use of natural gas by others in order to keep the price low. Whether or not there was oil price manipulation in 1998, we may never know. We do know that market forces returned with a vengeance. The same may happen in natural gas, though when is another question.
Originally published on November 10, 2009.
