Why Natural Gas Won’t Soar

December 10, 2009 06:00 PM

Linda H. Smith, Top Producer Executive Editor
Petroleum's price recovery into the $70/barrel area (West Texas Intermediate) has brought ethanol back and biodiesel production back into the black, reports Stewart Ramsey of IHS Gobal Insight. "Natural gas will recover, too, but not to the extent of petroleum,” he says. That spells moderation in ammonia prices.
The reason: Tremendous amounts of nonconventional gas have been found in the U.S.—four times as much—and it is cheaper to harvest. "A huge supply of gas is feeding into the fertilizer market at reasonable prices. U.S. nitrogen production is not dead and is quite profitable.” However, we will still import some of our nitrogen needs, and the world will still set nitrogen prices due to long-term contracts, he cautions.

You can e-mail Linda Smith at lsmith@farmjournal.com.
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