. one might expect that, as a consequence of what has been a dramatic shift from the hit - or - miss wildcat oil and gas exploration and development of the past to more - advanced technologies, the cost of developing new fields and, hence, the long - term supply price of new oil and gas would have declined. and, indeed, these costs have declined, but by less than might otherwise have been the case. much of the innovation in oil development outside opec, for example, has been directed at overcoming an increasingly inhospitable and costly exploratory environment, the consequence of more than a century of draining the more immediately accessible sources of crude oil. still, distant futures prices for crude oil moved lower, on net, during the 1990s as a result of declining long - term marginal costs of extraction. the most - distant futures prices fell from a bit more than $ 20 per barrel just before the first gulf war to $ 16 to $ 18 a barrel in 1999. distant futures for natural gas, which were less than $ 2 per million btu at the time of the first gulf war drifted up to $ 2. 50 per million btu by 1999, although those prices remained below the prices of oil on an equivalent btu basis. such long - term price tranquility has faded noticeably over the past four years. between 1990 and 2000, although spot prices ranged between $ 11 and $ 35 per barrel, distant futures exhibited little variation. currently prices for delivery in 2010 of light sweet crude, roughly equal to west texas intermediate, have risen to more than $ 27 per barrel. a similar pattern is evident in natural gas. even the spikes in the spot price in 2000 had only a temporary effect on distant natural gas futures prices. that situation changed in 2001, however, when the distant futures prices for gas delivery at the henry hub began a rise from $ 3. 20 per million btu to almost $ 5 today. the reasons for the sharp increases in both crude and gas distant futures prices seem reasonably straightforward, though they differ in important respects. the strength of crude oil prices presumably reflects fears of long - term supply disruptions in the middle east that have resulted in an increase in risk premiums being added to the cost of capital. although there are competitive spillovers from the higher price of oil, the causes of the rise in the long - term supply price of natural gas appear related primarily to supply and demand in north america. * * * today's tight natural

alan greenspan : energy remarks by mr alan greenspan, chairman of the board of governors of the us federal reserve system, before the center for strategic & international studies, washington, dc, 27 april 2004. * * * the dramatic rise in six - year forward futures prices for crude oil and natural gas over the past few years has received relatively little attention for an economic event that can significantly affect the long - term path of the u. s. economy. six years is a period long enough to seek, discover, drill, and lift oil and gas, and hence futures prices at that horizon can be viewed as effective long - term supply prices. these elevated long - term prices, if sustained, could alter the magnitude of and manner in which the united states consumes energy. until recently, long - term expectations of oil and gas prices appeared benign. when choosing capital projects, businesses could mostly look through short - run fluctuations in prices to moderate prices over the longer haul. the recent shift in expectations, however, has been substantial enough and persistent enough to influence business investment decisions, especially for facilities that require large quantities of natural gas. although the effect of these developments on energy - related investments is significant, it doubtless will fall far short of the large changes in our capital stock that followed the 1970s surge in crude oil prices. the energy intensity of the united states economy has been reduced by almost half since the early 1970s. much of the energy displacement occurred by 1985, within a few years of the peak in the real price of oil. progress in reducing energy intensity has continued since then, but at a lessened pace. this more - modest pace should not be surprising, given the generally lower level of real oil and natural gas prices that prevailed between 1985 and 2000 and that carried over into electric power prices. * * * the production side of the oil and gas markets also has changed dramatically over the past decade. technological changes taking place are likely to make existing energy reserves stretch further and to keep long - term energy costs lower than they otherwise would have been. seismic techniques and satellite imaging, which are facilitating the discovery of promising new reservoirs of crude oil and natural gas worldwide, have nearly doubled the success rate of new - field wildcat wells in the united states during the past decade. new techniques allow far deeper drilling of promising fields, especially offshore. the newer innovations in recovery are reported to have increased significantly the average proportion of oil and, to a lesser extent, gas reserves eventually brought to the surface