A news article on production of oil and natural gas in the Permian Basin of western Texas

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A news article on production of oil and natural gas in the Permian Basin of western Texas and New Mexico noted the following two facts:

i. “Shale drillers in the Permian Basin are producing vast amounts of gas as a byproduct of prospecting for oil.” 

ii. “Gas prices in parts of the prolific region hovered near zero last month and some trades went negative, to as low as a negative 25 cents per million British thermal units. . . .” 

a. What does it mean for a price to be negative? 

b. Why would firms drilling in the Permian Basin continue producing natural gas if they receive a zero or negative price for it?  

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Economics

ISBN: 9780135957554

8th Edition

Authors: Glenn Hubbard, Anthony Patrick O Brien

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