As Gasoline Goes Up, Natural Gas Cheaper Than Ever

At the same time gasoline prices are soaring, the cost of electricity is falling. The reason? Cheap and plentiful natural gas. A utility in Massachusetts has just sliced rates by 34 percent. Coming out of a recession, the lower electricity prices are quietly boosting the economy and providing some welcome savings to businesses and families.

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The nation's drilling boom has lowered the price of natural gas dramatically. It costs less than half what it did just a year ago. That's cut heating bills and brought some unexpected savings to a lot of families. It's also good news for plenty of businesses, as NPR's Chris Arnold reports from Boston.

CHRIS ARNOLD, BYLINE: When you walk into the Dancing Deer Bakery's cookie and brownie factory in Boston, you see big vats of cookie dough and all kinds of things you'd like to eat. Boy, it smells good in here.

FRANK CARPENITO: We've got molasses clove cookies over here. We've got chocolate chunk brownies over here.

ARNOLD: Yeah. I think it's the chocolate chunk brownies that I'm smelling. Frank Carpenito is the CEO of the company. He's walking us through the factory floor. One of the machines here is churning out dough onto big baking pans on a conveyer belt. So is this like a cookie dough squeezer machine, or what's the technical name for that?

CARPENITO: Yes. So it's a cookie extruder, basically.

ARNOLD: Extruder.

CARPENITO: So it's taking the dough that we just put together in the mixer. Today, we're just making our basic round bakery cookies.

(SOUNDBITE OF MACHINERY)

ARNOLD: All of this, of course, uses energy - natural gas in the big 7-foot tall bake ovens and electricity for everything else. And the cost of both of those has been falling, which coming out of the recent recession is a much needed boost for business.

CARPENITO: We've seen about 15 percent savings in our utility bill over the last quarter.

ARNOLD: That's just in the past three months. And the savings could get bigger.

CARPENITO: If this continues for a year, it'll be the equivalent of us being able to hire one additional employee into the company. So it's not an insignificant amount of dollars if the rates continue to stay low.

ARNOLD: Now, you might figure one more job at a cookie company isn't exactly going to rescue the economy and bring down unemployment. But these savings are playing out across hundreds of thousands of businesses around the country. And so the implications of cheap natural gas are actually pretty huge.

JOHN LARSON: What it means is roughly 1.6 million jobs by 2015 for this country.

ARNOLD: John Larson is an economist with the economic forecasting firm IHS. He says, basically, here's what's been happening: New ways of extracting natural gas out of the ground in the U.S. have in just the past few years brought a flood of cheap natural gas onto the market here. And there's plenty more.

LARSON: And so that's the excitement. Because then it becomes a question of how are we going to use it to fuel our economy.

ARNOLD: Larson says, down the road, there are all kinds of possibilities - natural gas cars and trucks, or even more likely the U.S. maybe could become the Saudi Arabia of natural gas, exporting it around the world. Who knows how much of that would actually happen? And even it doesn't, right now, there are already some pretty significant impacts. Electric utility companies, for example, are already cutting prices since making electricity is getting cheaper at gas-fired power plants. James Daly is the vice president of energy supply at the parent company of NSTAR, a utility in Massachusetts.

JAMES DALY: We - NSTAR - recently reduced electricity rates to commercial customers 34 percent.

ARNOLD: Thirty-four percent is, of course, a big deal for businesses that use a lot of electricity. Economist John Larson says that allows U.S. companies to sell products more cheaply. That helps them compete in the global economy. And U.S. consumers, of course, get some of those savings, whether from slightly cheaper cookies or cheaper lawnmowers or anything else made here.

LARSON: That's correct, right. The lawnmower is a great example. All the various components - steel manufacturing is a fairly intensive user of natural gas for the furnaces. And either helps to keep prices stable or drive prices down.

ARNOLD: Larson says all this has been quietly helping the whole economy.

LARSON: We found in our study that the average household disposable income in the near term was nearly $1,000 higher because of these lower prices of natural gas.

ARNOLD: So consumers have more money to spend. Of course, higher gasoline prices have been offsetting some of the savings for consumers. But Larson says going forward with natural gas still declining in price and more power generation shifting over to gas turbines, cheaper natural gas will probably provide even more of a boost. Chris Arnold, NPR News, Boston.

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