The Era Of Super Cheap Natural Gas Is Ending
The Era Of Super Cheap Natural Gas Is Ending
Soaring LNG exports and Power Demand for AI Are Driving Up Natural Gas Prices. Here’s a Deep Dive Into the Gas Market, With Nine Charts.
Robert Bryce
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Publication Note: The Fire Time Magazine appreciates the opportunity to republish this article, which was originally released on September 17, 2025. It is reprinted with permission from Robert Bryce. Be sure to subscribe to his Substack. Further use, duplication, or distribution is prohibited without the author’s written permission.
Over the past 15 years or so, thanks to the shale revolution, American consumers have saved untold billions of dollars on gasoline, diesel fuel, and natural gas. The natural gas story is particularly significant. Since 2005, domestic natural gas production has more than doubled, and the inflation-adjusted price of gas has fallen like a rock. In 2023, the spot price for gas at Henry Hub, America’s main gas trading point, was $2.50 per million Btu. In 2024, that price fell to $2.20 per MMBtu. For comparison, the inflation adjusted price of gas (2024 dollars) in 2010 was over $6 per MMBtu.
About 35% of all U.S. primary energy now comes from natural gas. (Oil provides about 39%.) Given the U.S. economy’s heavy reliance on gas, it’s evident that low-cost gas has been a key factor in the resilience of the U.S. economy over the past decade. Furthermore, that same flood of gas has turned the United States from a prospective importer of liquified natural gas to the world’s largest LNG exporter.
But the ongoing boom in LNG export capacity, combined with Big Tech’s insatiable demand for the juice it needs for AI, is fueling an unprecedented surge in demand for gas. Analysts and pipeline companies are predicting that U.S. gas demand could jump by about 25% between now and 2030.
Will the U.S. drilling industry be able to meet that demand? Tens of billions of dollars are riding on the answer to that question. Here’s a deep dive into the U.S. gas sector, with nine charts.
First, let’s look at prices. As I have explained many times before, the U.S. has an economic advantage over numerous other countries because we have cheap energy, and they don’t.
As seen above, gas in Europe and Asia costs three times more than it does in the U.S. That differential gives industrial companies in the U.S. a massive advantage over their overseas competitors. It also makes a huge difference in the electric sector.
While many industry veterans and analysts believe the oil and gas sector will be able to meet the surge in gas demand, any tightness in the market could result in drastically higher gas prices. That, in turn, will result in even bigger increases in domestic electricity prices. Last year, about 43% of all U.S. electricity production came from gas-fired power plants. Thus, any significant increase in gas prices will result in higher power prices, which have risen twice as fast as the overall cost of living over the past year.
Furthermore, as I mentioned above, in real terms, the price of U.S. natural gas has been falling for years. As seen above, in 2005, when domestic gas production fell below 50 billion cubic feet per day, the inflation-adjusted price of natural gas was about $14 per MMBtu. This week, that same quantity of energy is selling for about $3.
While that low price has benefited consumers, gas traders believe gas prices are going to rise substantially over the next two years or so. As seen above, the spot price for gas at Henry Hub in January 2028 is $4.71. The Energy Information Administration is also projecting higher prices. In its latest Short Term Energy Outlook, the agency said it expects gas prices to average $4.30 in 2026, an increase of 41% over Monday’s spot price of $3.05.
The projections shown above are from Kinder Morgan, the pipeline giant, and Wood Mackenzie, the global energy consulting firm. Other analysts are coming up with similar numbers.
East Daley Analytics, a Colorado-based energy research firm, is also forecasting natural gas use to increase by 25 Bcf/d by 2030. As seen above, in a recent report, the firm believes gas-fired power plants will use an additional 5 Bcf/d by 2030.
Jack Weixel, a senior director at East Daley, said the bulk of the growth in gas demand will come from LNG export facilities. “The demand will be there,” Weixel told me during a recent phone interview. “The question is how much supply do we have coming out of the ground?” He went on to say, “I think the production will be there to keep prices in check.”
As I noted in these pages in June 2024, the drilling industry’s productivity gains over the past decade or so have been nothing short of astonishing. I explained:
Between 2014 and 2024, gas production in Appalachia roughly tripled, going from about 13 Bcf/d to about 36 Bcf/d. Over that same period, the number of rigs dropped from about 120 to about 40, and new-well gas production per rig increased from about 6 MMcf/d to about 29 MMcf/d. Those increases are due to better drilling rigs, more powerful pumps, longer laterals (two- and three-mile horizontal sections are now commonplace), and continuing improvements in hydraulic fracturing.
The key question now is this: Can those productivity improvements continue?
As seen above, domestic natural gas production has more than doubled over the past 20 years as the drilling industry has become ever more proficient at getting hydrocarbons out of the ground. Improvements in fracking technology, longer well bores, better pumps, and better proppants have all contributed to this productivity. In the Eagle Ford formation in South Texas, EOG Resources is targeting lateral segments that extend 24,500 feet, or 4.6 miles! The company also expects that about 15% of its new wells will have laterals longer than 3 miles. EOG, which was spun out of Enron in 1999, also expects to reduce its direct well costs by about 6% this year. In other words, EOG provides a prime example of how upstream companies are increasing efficiencies and reducing costs.
While drillers could continue to ramp up production, and therefore keep prices down, other factors could also keep gas prices in check. The first and most obvious one is a global economic recession, which would slow demand for gas here in the U.S. and for LNG exports. Second, the AI craze could burst. A few breakthroughs in microprocessor technology, or in software, or another event, could slow, or even halt, the massive buildout of data centers now underway. That, in turn, would put a big dent in gas demand from the power sector. Third, the ongoing growth in solar and batteries, and the extended use of coal in the U.S., could also restrain gas demand in the power sector.
Several other factors point in the direction of continuing demand for gas. As seen above, on a global basis, gas use continues to grow far faster than any other form of primary energy. The world economy needs more energy, and as I have been saying for nearly two decades, gas is the obvious fuel to help meet that demand. Second, the U.S. continues to shutter its coal plants, and much of that shuttered capacity is being replaced with gas-fired generation. According to data compiled by Global Energy Monitor, more than 16 gigawatts of gas-fired capacity is now under construction in the U.S. Another 47 GW of gas plants have been announced, and 98 GW of capacity is in the pre-construction phase. While it’s doubtful that all of those projects will be built, it is apparent that the U.S. electric grid is becoming ever more dependent on gas plants. Further, all the new gas capacity will be added to the 578 GW of gas-fired capacity now operating in the U.S.. And despite the point I made above, the AI building frenzy shows no sign of slowing.
Finally, an extended period of low crude prices could result in lower gas production, and that would mean tighter gas supplies and therefore higher gas prices. Here’s why: A sustained period of low oil prices will reduce drilling in the Permian Basin, America’s most prolific hydrocarbon province. The EIA is projecting crude prices will average $51 per barrel in 2026, and that price is for Brent, the European marker. West Texas Intermediate, the U.S. marker, usually trades at a discount to Brent.
If oil prices stay at or below $50 per barrel, companies with significant operations in the Permian will likely reduce their drilling. That matters because crude oil prices and gas production in the Permian are inversely correlated. That is, low oil prices will result in reduced gas production from the basin. As shown above, the Permian now produces about 18% of all U.S. gas, and all of that Permian gas, about 19 Bcf/d, is coming out of the ground as associated gas. In other words, drillers in the Permian are targeting oil, not gas. Thus, lower oil prices will mean less drilling in the Permian, and that will result in less gas production at the very time that U.S. gas demand is increasing. And as has been shown many times, a smaller supply of any given commodity or service will mean higher prices.
My older (and smarter) brother, Wally, continues to be a perma-bull on gas prices. He believes that all the demand factors mentioned above, combined with tighter supplies and increasing geologic risk, will drive natty prices upward in a big way over the next two or three years. I’m starting to come around to his view of the market. But as I explained in April, a more conservative approach is to bet on the gas pipeline companies. That is, don’t bet on gas prices, bet on gas volumes. I referred to a decade-old quote from pipeline baron Rich Kinder. I explained:
Pipelines have the ultimate wide moat. They cannot be duplicated, particularly given today’s lengthy permitting process. Back in 2015, Kinder explained why he likes pipelines. “I don’t like a lot of risk,” he said. “To me, these toll roads in the form of pipelines and terminals that are overwhelmingly fee-based give you a lot of comfort the cash is going to be there.”
The punchline here is obvious: Natural gas is here to stay. It’s called the queen of the hydrocarbons for good reason. Wally and many others are betting on a sustained period of higher natural gas prices. Regardless of the price, it’s clear that demand for natural gas—both here in the U.S. and around the world—is booming, and that demand will continue rising for decades to come.
Place your bets accordingly.
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Robert Bryce
Robert Bryce is a Texas-based author, journalist, podcaster, film producer, and public speaker. Over the past three decades, his articles have appeared in numerous publications including the Wall Street Journal, New York Times, National Review, Field & Stream, and Austin Chronicle. He has given nearly 400 invited or keynote lectures to dozens of groups including the Marine Corps War College, Sydney Institute, Jadavpur University, Northwestern University, and a wide variety of professional associations and corporations. He has also appeared on dozens of TV and radio shows, including NPR, BBC, MSNBC, Fox, Al Jazeera, CNN, and PBS.
