Texas Natural Gas Prices Drop So Low They Pay You to Take It

In West Texas, an unprecedented surplus of natural gas has led to negative pricing, with producers sometimes paying businesses to take the excess fuel off their hands. This situation arises from a lack of pipeline capacity to transport the abundant natural gas to markets that require it, particularly along the Gulf Coast and in California. The region, which houses the Permian Basin—the largest oil field in the United States—primarily focuses on crude oil extraction, resulting in a significant byproduct of natural gas. The dramatic shift in natural gas pricing follows a period of soaring prices two years ago, triggered by geopolitical tensions after Russia's invasion of Ukraine. This event caused supply restrictions that alarmed Western leaders and led to a spike in natural gas prices. However, the current scenario in West Texas starkly contrasts that spike, as natural gas has traded below zero for much of the year, with 57 days recorded at negative prices through July, a significant increase from just nine days in 2022. In May, the spot market saw prices plummet to as low as negative $4.60 per million British thermal units in West Texas, while the same day, prices in Florida exceeded $3. This disparity highlights the challenges faced by producers in managing the surplus and the logistical issues stemming from inadequate infrastructure to transport the gas to areas of demand.