The natural gas industry has spent tens of millions of dollars trying to convince consumers that their product is the proverbial “silver bullet” that will save them thousands of dollars in home heating costs for years to come, if only they would switch fuels. But like almost everything else in life, if it sounds too good to be true, it probably is –and the fact is, when it comes to natural gas if you scratch the surface of the industry rhetoric, it becomes abundantly clear that switching to natural gas is a sucker’s bet.
The natural gas industry bases its claim of savings on the fact that natural gas prices are at record lows, driven down by the development of a controversial drilling technique called hydraulic fracturing, or “fracking,” as it has come to be known in the parlance of our times. The industry maintains that the widespread use of fracking has vastly increased our nation’s reserves of natural gas, although that assertion has come into question by no less an authority than the federal Energy Information Administration (EIA), which recently issued a report stating that those claims may have been, to put it charitably, dramatically overstated.
That said though, let us agree that the industry’s estimate is at least in the ballpark. The fact remains that the cost of converting a home heating system to natural gas can run as much as $10,000 or more, an investment that the industry maintains can be amortized relatively quickly by the savings that can be achieved by switching fuels.
Unfortunately, the notion that the cost of switching to natural gas can be quickly recovered is based on the assumption that natural gas prices will remain where they are –and the fact is, that is simply not the case.
History shows that the price of fossil fuels track one another fairly closely. When the price of oil climbs, the price of natural gas closes the gap; likewise, when the price of natural gas goes up, the price of oil follows, prodded by the invisible hand of the free market.
Indeed, a confluence of circumstances is already taking shape that virtually guarantees that the price of natural gas will increase in both the short term and the long run. As one market analyst said recently, “the surest route to $8 gas is for everybody to plan on $4 gas.”