Is Boom-Bust a Relic of Gas Sector's Past, or a Perpetual Inevitability?

摘要

Whenever someone insists there's been a fundamental shift in the market, it's best to hold on to your wallet until things play out. So it is with the notion that low break-even costs for gas production in seemingly inexhaustible shale plays will combine with ever-rising demand to finally set the sector free from the boom-bust cycle. The root cause of boom-bust is deeply ingrained. Producers will ramp output to levels that will more than satisfy demand, especially if prices are rising; after all, they are not in the business of moderating activity to keep supply and demand in balance. So, when demand drops due to recession or other forces, producers can't flip a switch and shut down drilling operations, and a price-deflating supply glut becomes inevitable.