The truth about the cost of natural gas

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Natural gas is a more expensive fuel than coal.

• According to EIA data, natural gas prices averaged over the period 1999‐2008 have been almost four times more expensive than coal. Natural gas prices have averaged $5.75/MMBtu over the ten‐year period, whereas the price of coal has averaged $1.46/MMBtu over the same period.⁽¹⁾
• During the first ten months of 2009, the price of natural gas has been more than double the price of coal. Natural gas prices averaged $4.65/MMBtu during January‐October. By comparison, coal averaged $2.23/MMBtu over the same period.⁽²⁾
• According to EIA projections, natural gas prices are expected to increase by 60 percent between 2010 and 2030. By comparison, coal prices are projected to decrease by 2 percent over the same period. The table below shows EIA projections (from AEO 2010) for natural gas and coal prices for the electric power sector. Based on these projections, coal is expected to cost a fraction of the price of natural gas for the foreseeable future.⁽³⁾

Natural gas prices are volatile.

• Over the most recent 19‐year period (1989‐2008), average annual natural gas prices have fluctuated widely between a low of $2.16/MMBtu in 1991 and a high of $9.66/MMBtu in 2005, a difference of $7.50/MMBtu. Over the same period, coal prices have varied modestly from a low of $1.20/MMBtu in 2000 to a high of $2.52/MMBtu in 2008, a difference of only $1.32/MMBtu. The graph below shows the volatility of gas prices compared to the stability of coal prices.

⁽¹⁾ EIA Electric Power Monthly, January 2010. Monetary values are expressed in nominal dollars.
⁽²⁾ Ibid.
⁽³⁾ Ibid. Prices are expressed in 2008$ per MMBtu.
⁽⁴⁾ EIA Annual Energy Outlook 2010. Coal and gas prices are in 2008$/MMBtu. Coal price is FOB. Gas price is based on Henry Hub.