Further to Timbo's prodding, it's time to wheel out the old oil-price graphic - recalibrated for the remarkable current turn of events. Last time something like this happened it was $10 in 1998 - which turned out to be the bottom (where canny John Browne bought Amoco, Arco and BurmahCastrol). At the time, the Economist surmised it might fall as far as $6 ...
We've had several cracks at this since it crashed through 60 a year ago - click on our 'oil price' thread if you fancy - and the geopolitics are still playing out. Saudi Arabia is behaving as though it reckons it can hold its breath; and of course little Volodya is disinclined to blink. US producers, debt-financing and all, will simply play the market game; and their stamina has long since confounded the ignorant.
Anyhow, today my subject is the parallel collapse in the price of natural gas. The current situation is that the world is divided into 3 gas markets: North America (cheapest); Europe (mid-range); and Far East (highest). Until the shale gas revolution really got into its stride, imported 'Atlantic' LNG was the marginal source for both USA and Europe, and so prices in these markets converged, with those of the Far East at much higher levels - even higher still after Fukushima, when Japan increased its gas burn significantly. However (cutting the long story short) North America is now self-sufficient but essentially unable to export, and so becomes a low-priced 'gas-island'; but LNG is now available in vast - and growing - quantities and demand is falling across Japan and Europe, so the Eu and Far East markets have converged (mediated again by LNG). The USA is now on the point of being able to export its shale surplus, and soon the whole world will be one gigantic, heavily over-supplied gas market.
With me so far?
For reasons good, bad and historical, the price of gas can often be highly correlated to that of oil, and the weakness in oil is exacerbating the weakness in gas. None of these phenomena seem likely to go away imminently. So: the price of gas in the USA is set to rise a bit, and that in Europe + Far East to fall even lower. This has been brilliant for Japan & Korea. The Chinese don't use very much, but Russia of course would dearly like them to, and has at long last sold them some future supplies on terms so humiliating, they don't really like to talk about it. In the meantime some extraordinary power-politics has seen Gazprom trying to muscle back into the good books of their main hard-currency customer, playing their mighty German card for all it is worth, which is quite a lot. In any event they are doomed to another mammoth round of price renegotiations, as continental European buyers trigger their crazy Civil Code 'price re-opener' clauses and demand cuts or rebates by the billion.
The other big gas exporters, notably Qatar, also Nigeria and increasingly Australia - all LNG rather than pipeline - are a bit stuck, and will probably just have to suffer from disappointing sales prices on their sunk-cost production. The problem for LNG sellers is that the production cost is high, whereas Russian (and Norwegian etc) pipeline gas has a much lower marginal cost, sometimes even negative if oil production comes with the gas.
So: some world-scale economic impacts, geo-politics, power politics - but what about us in Blighty? All this price-softening has come at a very good time for us because (a) our own North Sea gas production is in terminal decline and (b) one of our important sources of winter gas - the Dutch - are rapidly winding down production from the gigantic Groningen field (which kicked off the whole North Sea thing in the 1960's) in light of its increasing age, and propensity for causing serious earth tremors.
On the other hand it does nothing for stimulating a shale-gas industry here: but hey, that gas ain't going nowhere, it'll still be there when we need it. Genius George seems willing to burn some political capital to get the fracking underway, but I'm not really sure why.
It will directly impact two other industries (and indirectly, many more). Firstly, it will hasten the long drawn-out demise of European coal use, which has been enjoying an indian summer here and elsewhere. We are gradually seeing gas become cheaper for power generation once again after several years of being out-of-the-money; and of course government policy is to stimulate - somehow, they are not quite sure how - a new and very substantial 'dash-for-gas'. They "want" 30 or so new gas-fired power stations to spring into being, and sustained low gas prices are the way to get 'em.
Secondly, it trashes the prospects for renewables and nukes, because it will cause the price of electricity to fall, and make fixed-price subsidies ever more expensive. The whole low-carbon thing was predicated on ever-rising prices. The greens know this (despite loud denials) and we must draw a kindly veil over their ever-increasing misery.
Everything has its cycle, and who knows how long this one will last? Long enough to cause tremors even greater than those Groningen earthquakes, I suggest. Many will wonder why domestic gas bills don't fall in proportion to the wholesale price: but that's not the only way consumers can benefit from these mega-trends.