America’s most prolific oil field is now its worst market for natural gas. As Bloomberg reports, a pipeline shortage that’s leaving gas trapped in West Texas’ Permian Basin means prices for the fuel there are the lowest of any major U.S. hub.
Prices for Permian gas—produced alongside oil in the play—have tumbled 32% as of March 29 from a year ago, while output rose to a record. And the pipeline crunch is also pummeling the region’s oil market.
All that gas production is creating a dilemma for drillers, who may be forced to curtail oil output if they can’t get their gas to market. Producers can burn off some of the gas—a process known as flaring—but state regulators typically won’t allow that to happen indefinitely. Mild spring weather also is limiting demand for the heating fuel, meaning explorers may be giving their gas away.
In the next three to four weeks, “natural gas prices in the Permian can go to zero because it’s literally a byproduct,” says Kyle Cooper, a consultant for Ion Energy in Houston. “There’s so much gas coming, the system really pushes and fights to get it out.”
