CALGARY — The price of natural gas fell to its lowest level in more than seven years Thursday — good news for consumers who use the fuel for electricity and heating, but bad news for energy companies that produce it.
The September contract for natural gas dropped 17 cents to just under US$2.95 per 1,000 cubic feet on the New York Mercantile Exchange, a drop of 5.5 per cent.
It’s the lowest level since August 2002.
“Feast or famine — depends where you are,” said Brian Gormley, director of policy and economics for the Canadian Gas Association.
“Some people like it, some people hate it. Low prices good are for consumers, but not great for the upstream guys.”
The natural gas distribution companies that CGA represents buy the fuel on the open market, passing on the costs to consumers in their bills.
In Canada’s chilly climate, natural gas demand tends to be highest in the winter months.
But this winter coming up, “there’s just too much product on the market for that to happen,” Gormley said.
“For the coming heating season, I think you would see most folks expecting a pretty benign pricing environment.”
Meanwhile, companies that produce the natural gas have been suffering.
For several months, natural gas has been trading well below the threshold at which producing it makes economic sense, which is normally between US$6 and US$8 per 1,000 cubic feet, depending on the region and type of reservoir.
Many natural gas producers in Western Canada have halted work and that means firms that provide drilling and other services have seen their business dry up.
“Where they have control over things, they’re doing what they can as far as getting rid of assets they don’t need, cutting down on overhead costs,” said Roger Soucy, president of the Petroleum Services Association of Canada.
“A significant part of that is labour, so companies have reduced wages, introduced job sharing where appropriate, and ultimately have layoffs if they continue to not be able to put people to work.”
There were about 63 per cent fewer rigs working across Canada this week than the same week of 2008, according to data on the Canadian Association of Oilwell Drilling Contractors’ website.