What do baseballs and fertilizer have in common? They are the result of affordable natural gas.
Natural gas has long been a key input for many products and functions, but today we are seeing the rapid expansion of this clean-burning resource thanks to unprecedented domestic production. From baseballs and crayons to key agricultural inputs we are witnessing a dramatic shift in American industry as it transitions to natural gas.
A study commissioned by the Ohio State Grange recently found that natural gas playing an increasingly important role in the agricultural sector as producers fight to stay profitable and rein in costs. Energy has become one of the leading expenditures for farm operators, often accounting for over 30 percent of total costs. The effect of this is twofold with energy costs not only impacting the bottom line but also exposing farms to greater risks imposed by often unpredictable and dramatic energy market.
According to the study’s authors, Dr. Gary Wolfram and Charles Steele of the Hillsdale Policy Group, “Agricultural operations are sensitive to energy price shifts in two ways: directly through such sources as fuel and electricity and indirectly through sources like fertilizer and pesticides.” Farms bare risk from energy price fluctuations at virtually every level of operation.
Market dynamics across our region are changing though thanks to surging natural gas production in the Marcellus and Utica Shale formations. “One of the likeliest sources of potential cost savings for Michigan and Ohio agriculture is expanded use of natural gas,” say Wolfram and Steele.
Farmers have already begun to feel some of the benefits of an abundant supply of domestically produced, affordable natural gas, but the region can’t fully benefit without the development of energy infrastructure to necessary to bring product to market. In fact, a recent update from the U.S. Energy Information Administration (EIA) cited lack of pipeline capacity is a major contributing factor to why prices remain high outside the producing region.
New infrastructure additions coming online in the past several months have likely contributed to year-over-year growth. But while Marcellus production has grown rapidly over the past several years, pipelines to move these increasing volumes out of the Northeast to consumption centers have not grown as quickly, largely because infrastructure projects have long lead times. Insufficient takeaway capacity will generally result in lower prices in the producing region and higher prices in the receiving region than would have been expected otherwise.
A multitude of projects like the Rover Pipeline offer a practical, safe solution to delivering affordable natural gas to not only agricultural operations, but also homes and businesses that currently lack access to this valuable energy resource.
(Source: Energy In Depth)