Filling Up With Cheaper Gas

Andrew Sullivan —  Mar 11 2014 @ 8:19am

Gal Luft argues that America’s natural gas should go toward powering our vehicles rather than homes:

The best way to compare energy sources is to look at their cost per unit of heat, measured in British thermal units. The spot price of 1 million BTUs, expressed as mmbtu, derived from natural gas is about $4.30. The price of U.S. coal is more or less the same. At current oil prices, the price of 1 mmbtu derived from oil is roughly $17. That means that from a pure economic standpoint, the upside of replacing coal with natural gas is zero, while that of replacing oil with natural gas is $12.7 per mmbtu. Put differently, at current prices, the 3.5 trillion cubic feet of gas that the Energy Information Administration assumes the United States will be exporting annually starting next decade is valued at $15 billion. If this amount of gas stayed in the United States and were used to power cars and trucks, it would have displaced, depending on the technology, 3 million to 4 million barrels of oil a day, eliminating oil imports at the cost of $100 billion to $150 billion a year. Instead, the United States will be exporting this $15 billion worth of energy only to import an equivalent amount of energy at up to 10 times the cost.