Mild December cuts natural-gas price 29 percent

A mostly mild winter might be good news for many people who hate cold and snow, but so far it has spelled bad news for the natural-gas industry. The benchmark price for gas on Tuesday, Dec. 23, was $3.17 per 1,000 cubic feet, a 29 percent drop from $4.50 in late November, Jonathan Fahey reports for The Associated Press. "Natural gas is used by half of the nation's households for heating and to generate 26 percent of the nation's electricity."

"The lower prices are expected to linger and could reduce electricity prices and heating bills in the coming months," Fahey writes. "Bob Brackett, an analyst at Bernstein Research, wrote in a recent note to investors that he expects natural gas to average 'in the low 3 [dollar]s" per MCF into the spring, and a warm winter could push the price below $3.'" That's a far cry from last year when prices hit as high as $6.15 in February during last year's brutal winter. (Seeking Alpha graphic)

"Conditions look good for low prices throughout the spring. After that, though, prices could head back up," Fahey writes. "One-fifth of the nation's natural-gas production is from gas found when drilling for oil . . . A a drop in the price of oil is forcing drillers to cut back, and that may slow the growth in [gas] production. Also, in April of next year an Environmental Protection Agency rule governing emissions of mercury and other toxic chemicals goes into effect. That will force electric utilities to reduce their use of coal, the chief source of those emissions, and turn instead to natural gas." (Read more) For the coal industry, part of the bad news is already here, because lower gas prices make coal less competitive with gas among utilities that can easily switch fuels.