Although the price of both natural gas and oil are now much lower than in the recent past, both of these commodities can vary wildly in price, according to supply and demand. The cost of heating your home could be greatly increased by any type of disruption in production of either fuel, especially when coupled with a sudden increased demand.
While many American consumers have switched over to natural gas for heating, a high efficiency oil furnace may be a more stable and reliable bet for the future.
Why are U.S. consumers paying much lower prices for oil and natural gas?
The U.S. has an abundant supply of natural gas, but much of it has been inaccessible because it was trapped under large formations of shale rock. Technological advances in hydraulic fracturing created an efficient method of penetrating the shale formations and extracting the natural gas.
Hydraulic fracturing, or "fracking", involves pumping massive amounts of water and chemicals into the ground to blast through the shale and reach the gas.
These previously inaccessible sites were also found to possess previously untapped oil reserves. Hydraulic fracturing is also able to penetrate deeper into previously depleted oil wells and extract additional oil.
These advances in production of oil in the U.S. occurred just as global demand dropped because of a worldwide economic recession. Major global oil producers have been hesitant to cut production to stabilize oil prices, both for political reasons and because some countries' entire economies are dependent on oil production.
The combination of a rise in domestic production and a glut of oil of the global market has slashed the price of oil. Because natural gas is difficult to export from the U.S. because it must be liquefied to be transported, consumers in the U.S. have reaped the benefits of the new abundance of natural gas.
Possible threats to the prices of natural gas in the U.S.
Climate change
As the effects of climate change become more apparent, legislation may be passed to curtail the use of fossil fuels. This may result in substantial savings for consumers who have the foresight to invest in a high efficiency oil furnace. Subsidies and rebates for these purchases, as well as added taxes on fossil fuels, can provide substantial incentives for becoming energy efficient.
Concerns about the environmental effects of hydraulic fracturing
Limitations or outright bans on fracking may occur at both federal and local levels if the procedures are proven to cause environmental damage. Recent earthquakes in Oklahoma have been attributed to the after effects of hydraulic fracturing. There have also been disputed claims that fracking is involved with contamination of well water.
If these allegations can be proven, and fracking is curtailed or banned, the prices of oil and natural gas may rise dramatically. However, it is the supply of natural gas that is most at risk in the U.S. because it is produced domestically.
Won't the price of oil be affected by limitations on fossil fuel production in the United States?
Even if fracking is banned or severely curtailed, oil will still be available on the global market. High global oil production, which keeps prices low, is likely to continue into the future because of a lack of cohesiveness among major producers, political rivalries, and countries that need oil revenue to maintain financial stability and recover from the recent recession.
Until global trade in liquefied natural gas can be cost efficient, or cleaner and safer technologies can be developed for U.S. domestic gas production, oil is still the most stable choice for your future heating needs. To learn more, contact a company like Small & Sons Oil Dist Co.