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March 20, 2008

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Enden

VangeIV -There is an element of truth in evyrnthieg you say, but you seem to end up with a somewhat distorted picture in the totality.Economics gives us a nice tool to think about what has happened to the domestic gas market. It's called a "supply curve".The application horizontal drilling/fracking to the shale plays has added a very long plateau to the gas supply curve in the $5 or 6 per mcf price range.Does this mean sweetness and light always and everywhere? No, but it's better than not having this large increment of available supply at all.Without this huge new increment of potential supply we know a few things would happen. We know gas prices would be higher because we would be relying on more expensive sources of gas at the margin, and total quantity of gas produced would be lower (increasing the quantity demanded and cost of substitute energy sources.)So, while this may not be the energy panacaea, it is certainly a very significant development that is already paying large dividends to the US energy consumer and will continue to do so for decades to come.

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