Decline in natural gas price leads to lower earnings for major oil companies

Houston Chronicle:

Profits for the biggest U.S. energy producers including Exxon Mobil Corp. (XOM) are poised to decline the most since the financial meltdown of 2008-09 as the drilling technique known as fracking collapses natural gas prices. 

Exxon and Chesapeake Energy Corp. (CHK), which today reports 2011 earnings, will see net income in 2012 slide about 8 percent and 10 percent, respectively, according to the mean of analyst estimates compiled by Bloomberg. That would be the biggest drop since 2009 for the companies, the largest U.S. gas producers. 

While higher global demand for transportation fuels has driven up crude prices 32 percent since 2009, the domestic gas glut is pinching earnings for producers even as it pushes the U.S. toward energy independence. Especially hurt are Chesapeake and ConocoPhillips (COP), which amassed gas assets before the full impact of fracking on supply growth was apparent, said Michael McMahon, a managing director for energy investments at Pine Brook Partners LLC, a private equity firm in New York.

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The law of supply and demand does work in the energy business and if the Democrats would get out of the way, the price of oil would decline too as we brought new areas into production.  I noted earlier today that 10 years ago Democrats were saying that it would take 10 years for drilling in ANWR to be productive and here we are 10 years later and they are still blocking production for the same bogus reasoning.  They are blocking drilling in many offshore tracts and in areas of the Western US.  That means they are blocking jobs and revenue to the government that is desperately needed to reduce the deficit, but they would rather cut money for national security than let private companies create jobs and revenue.