The natural gas dilemma

Davis Swan in his “Black Swan” blog presents an interesting and somewhat pessimistic view of the current natural gas bonanza that exists in this country at the present time.
In the 2007-2008 period natural gas prices were high, in the $11 to $12 per MMBtu range. At the same time the hydraulic fracturing boom was sweeping the industry.

In the January 2007 to January 2009 period, there were some 1400 well drilling rigs in operation. Over the next year gas prices plummeted to around $4 and the weekly drill rig count dropped to about 800 in the 2010-2011. Gas prices dropped even lower to below $3 and the drill rig count followed to a current level of about 350 Gas prices have recently moved up modestly.
Looking to the near term future, several factors are seen as influencing the natural gas supply, demand and price in this country. The reduced drilling coupled with more rapid than expected production decline of gas wells will negatively impact the amount of shale gas available over the next few years. Some 40 GW of coal fired generating capacity will be phased out as more rigorous emission standards are implemented. Much of the reduced coal fired generation capacity will be replaced with gas fired generation.
Inevitably this will result in tightened gas supplies, increased costs for gas for heating, increased electricity costs, and unfortunately continued reliance on fossil fuels with continued discharge of carbon dioxide into the atmosphere.