- [Narrator] The price of virtually every form of energy
is hitting new lows in 2020.
Oil prices are still depressed
after a historic crash in spring.
Natural gas hit a 25 year low this summer
and prices for coal continue their descent.
Even the cost of generating renewable energy
has fallen so sharply
that it's becoming competitive with fossil fuels.
The rock bottom energy prices are bad
for drillers and other producers,
but they're great for consumers
who have to fill their tanks
and power their homes
and there are boosts for businesses
that consume a lot of energy
like manufacturers and utilities.
But some experts say this price rout
across the energy sector isn't built to last.
Here's how energy got so cheap.
The main thing pushing down prices
is a huge glut of natural gas.
Production sky-rocketed in the U.S.
over the last decade and a half
as shale drillers unearthed troves of the fuel.
- We started to build U.S. gas supply
just ahead of the Great Recession,
anticipating a real exponential growth
in energy demand globally.
We built capacity toward a demand peak
that never materialized.
- [Narrator] The rise in production swamped the market,
pushing down prices, even as the U.S.
burned more natural gas than ever in 2019.
Then the coronavirus shut down businesses
around the globe.
As Americans hunkered down,
demand for electricity plunged.
Economists estimate that roughly half
of the American workforce is now working from home.
With workers gone, office buildings and factories
turned off the lights and the air conditioning.
- Back in April, when COVID containment measures
were at their peak, overall power demand was down 10%.
- [Narrator] As demand sunk, U.S. gas producers
were slow to respond and dial back output
which added to the glut,
driving down wholesale prices even further.
Cheap natural gas which is the biggest source of electricity
in the United States has meant lower power prices.
Here's a look at prices in 2020,
versus past years.
In New York City, prices were down by about half,
compared to the five year average.
As gas prices bottomed out,
a similar dynamic was playing out in oil.
This spring, crude prices took an unprecedented turn
with futures contracts trading in negative territory
for the first time ever.
- We think of it more, not so much as a perfect storm,
but rather, death by a thousand cuts
for these oil producers.
Over the years, U.S. production grew.
To some extent, global demand didn't quite reach
the expectations on which producers
hinged their production plans
and we ended up with more oil in the market
than we knew what to do with
and then COVID was the last shoe to drop
and cut things in a way
that we've certainly never seen before in the industry.
We simply ran out of space to put the oil.
- [Narrator] Within a few weeks, prices bounced back,
but are still low enough to bankrupt oil companies.
This pushed down gasoline prices across the country.
In some regions, prices dropped below $1 a gallon.
Though fewer people are driving and flying,
those who are, are reaping the benefits.
Here's the retail price of gasoline in the United States.
You can see, at its lowest point,
the average price was $1.77, down from $2.78 in July 2019.
The cost to install new, renewable energy projects
is plunging, too.
The long-held theory is that low fossil fuel prices
would hamper the development of renewable energy projects,
but that's not how it's playing out.
Renewable energy has gotten cheaper
presenting power buyers with options.
- Certainly in the United States, previously a lot of
renewable energy deployment was driven by state mandates.
Now because the price of energy for these technologies
has dropped so rapidly, many utilities and energy purchasers
are choosing to buy wind and solar
for clearly economic reasons.
- [Narrator] This chart shows the levelized price
of different types of energy
which accounts for production costs.
- The levelized cost of energy is trying to capture
the total lifetime costs of an energy asset,
so it captures upfront costs, operating costs,
and benefits associated with that system.
- [Narrator] You can see that prices
for new, renewable projects
have fallen over the last decade.
In some cases, sharply.
That's in part, thanks to a decade of low interest rates
which helped fuel the shale drilling boom
and made renewable energy projects cheaper, too.
But it's also do to advances in technology.
- [David] Scaling up that supply chain
has really reduced costs.
- [Narrator] Declining costs to produce renewable energy
have resulted in growing supplies of green power
around the world, pushing down prices,
and encouraging consumption.
In the U.S., more electricity was consumed last year
with renewable sources than with coal
for the first time in more than 130 years.
So what do these trends mean for consumers?
The lower prices aren't always evident
on your monthly bill, due to taxes and other factors,
but the real cost of electricity to consumers and businesses
has declined slightly over the last decade.
- Analysts expect, at the end of the day, in the long term
for electricity prices to go down.
It's already based off of technology improvements,
the lowering costs of wind and solar,
but some of it is also regulatory.
- [Narrator] In the short term however,
experts say prices could rise.
Producers turned off the spigots
in hopes of reducing the glut
and now, demand for natural gas is picking back up.
- Those two trends don't work together.
Growing demand on one side, encouraged by the low prices
and declining supply with producers who simply can't
make things work with the gas prices where they are.
Do we think, by the winter, you're gonna see
a much stronger gas price come through?
Do we think we're at a point where gas prices
are unsustainably low, such that they have to rise?
- [Narrator] What is certain is that 2020
is shaping up to be a historic year
of abundant, cheaply produced energy.