Natural Gas and Its Role in the New Energy Dynamics
2013 | Case No. P83 | Length 41 pgs.
“Natural Gas and Its Role in the New Energy Dynamics” presents a comprehensive look at new natural gas extraction technology (hydraulic fracturing or “fracking” and horizontal drilling), as well as the economic and climate effects of the recent dramatic increase in unconventional natural gas production and consumption. It discusses the impact of the low natural gas prices in the U.S., as well as the lucrative arbitrage opportunities in transporting liquified natural gas (LNG) to Europe and Asia, where prices could be as much as five times higher than those in the U.S. The case also explores the new energy dynamics created by the natural gas boom, most notably the significant decrease in U.S. coal production and consumption due to low natural gas prices. It looks at other options for coal companies, such as exporting more coal to China, and Carbon Capture and Storage (CCS). The potential for natural gas to replace oil as a transportation fuel is also discussed. The question presented to students by the case is whether the executive director of a fictional environmental group should support the use of natural gas, and if so, under what conditions. Reasons for supporting the use of natural gas include reducing the use of coal in the U.S., a key goal of many environmental groups. When burned, natural gas emits only half as much carbon dioxide as coal—so the substitution could positively impact climate change. However, data on the climate effects of LNG and compressed natural gas (CNG) in certain uses—such as in transportation fuel—are still incomplete. In addition, there is evidence that fracking may cause local environmental damage and that methane leakage must also be taken into account.
Learning ObjectiveThe teaching objectives of the case are to educate students about natural gas and the rapidly changing energy industry, and to ask them to present the decision that they think the environmental association’s executive director should make, based on the facts of the case.
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