T. Boone Pickens had some interesting comments a few weeks ago in a speech at a Calgary business event. According to Reuters, Pickens advised natural gas producers to cut production in an effort to boost prices.advocate
“Right now, if I was running a drilling program in the United States, I would stop drilling wells,” Pickens told the audience. “Kill the drilling, let the supply go down, and you can expect a better price for gas.”
I’m no economist, but it seems to me if the price of natural gas goes up, wouldn’t the demand likely go down? We saw that same scenario play out recently with record crude oil prices. A barrel of oil went up, therefore the price of gas skyrocketed, and driving behaviors changed.
Pickens is perhaps the leading advocate for natural gas in this country. One of his big pushes is to convince the trucking industry to switch to natural gas tractors. Costs often get in the way, though.
If the ultimate goal is to increase demand for natural gas, how would boosting the price do that? Why would anyone, in trucking or otherwise, spend the extra money to purchase a natural gas vehicle or install natural gas in their homes so they could knowingly pay more for the fuel?
Perhaps it’s because natural gas producers have not found the foothold they need in this country to make a significant profit. The only way to do that, and to meet investors’ expectations, is to raise prices. Pickens told the audience that producers are under pressure from investors and analysts to raise production. The investors may be right. Boost supply, lower prices, and create demand for the fuel.