(Bloomberg View) — U.S. energy markets, efficient as they are, have already begun pricing Hurricane Harvey’s effects. With refineries and pipelines out of service, gasoline futures have spiked. So far, however, natural gas futures have hardly responded to Harvey, and it may be another week before they do. One thing is certain: The U.S. gas-production sector has changed drastically in the 12 years since Hurricane Katrina.
From Aug. 1 to Sept. 30, 2005, thanks to Katrina, gas futures prices rose 70 percent. But changes in the production landscape have created a less reactive market this year. The gas-production system isn’t hurricane-proof, by any means, but it is more widely distributed than it was.
Since 2005, the U.S. has added more than 120,000 gas wells, mainly in Texas, Pennsylvania, Oklahoma and Colorado. In 2015, there were 555,000 in total.
Those onshore wells have not just made up for declining offshore production, they have handily exceeded it. Offshore gas is now only 4 percent of total U.S. withdrawals. Texas, Pennsylvania, Oklahoma and Colorado are 53 percent of all production.
The oil and gas value chain seems to view hurricanes as less material to business. Mentions of “hurricane” in public company filings have fallen, after rising for years.
It’s understandable that upstream and services companies mention hurricanes less these days, given production’s move inland. Midstream companies and refining and marketing firms, on the other hand, mention hurricanes more, because their coastal infrastructure hasn’t moved since 2005.
Factors other than a hurricane can also affect the U.S. gas market — lower-than-usual gas storage inventories, for instance, or heat waves causing a spike in demand for power. A sustained impact on Gulf of Mexico offshore production would also influence prices, even though the Gulf is far less significant than it once was.
Because none of these things happened this week, natural gas futures have not reacted as wildly as gasoline has. At the moment, shale gas production — and with it a more distributed, more resilient gas production system — makes for a post-storm futures market that would have been hard to imagine just 12 years ago.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Nathaniel Bullard is an energy analyst, covering technology and business model innovation and system-wide resource transitions.
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