Improved techniques for extracting natural gas has lead to substantial price reductions. Unlike oil, natural gas doesn't have the infrastructure in the United States for export to world markets. Consequently, domestic use of natural gas for heating has increased, and consumers are having their oil furnaces replaced by those powered with natural gas. However, they may have acted in haste.
What caused the drop in natural gas prices in the United States?
Advances in hydraulic fracturing, or "fracking" as it is commonly known, have allowed for the extraction of previously inaccessible natural gas from beneath shale rock deposits. This has created a large surplus of natural gas, which can't be exported in its natural state.
This means that all domestic natural gas production can only be sold in local markets. Variables that affect the price of oil, such as political instability in oil producing countries and demand from massive industrial growth in Asian countries, don't apply to domestic natural gas production.
However, there are issues with hydraulic fracking that may curtail its use. This technique involves the use of water and chemicals under high pressure to blast away shale deposits.
Environmental concerns have led to restricted use in some areas. Issues include accusations of contaminated water supplies and possible links to seismic events brought about by hydraulic fracturing.
Why is oil becoming a better choice as a home heating fuel?
Hydraulic fracturing doesn't only allow access to natural gas deposits. Oil is also being extracted in large enough quantities that domestic oil production in the United States is thriving. However, the price of oil is also being affected by global events.
Major oil producing countries have been relatively politically stable, allowing for the production of oil to remain unimpeded. This is being coupled with an economic slowdown in countries such as China, who have been voracious consumers of oil for manufacturing. These factors lead to a surplus of oil on the world market and subsequent lower prices.
Unlike natural gas, which remains a domestic resource, oil has the infrastructure to allow it to serve a global marketplace. If natural gas production slows because of legislation related to environmental concerns, oil will still be available from the major producers.
In addition to the steady availability of oil, technological advances in oil furnace efficiency have led to lower fuel use and cleaner burning of heating oil. With these facts in mind, it may only be a matter of time before oil becomes a cheaper and cleaner source for home heating fuel.
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