Investment decisions take into account expected returns, but they must also consider costs. During a short break recently, I learned that lesson anew. I visited Gloucester, the historic fishing village north of Boston. Settled in 1623 by Englishmen seeking a better life, it has always figured prominently in the Bay State's economy. But as in all searches for a commodity—whether codfish in New England, coal in Chile, oil in Nigeria, or natural gas in Pennsylvania, there can be a human cost. More than 5,000 men and close to 1,000 ships have gone out to sea from its harbor, never to return, according to a monument on the shore.

Nevertheless, despite dangers, toil and expense such as this, countries still have to produce commodities of all kinds, and do so safely and profitably.

It was extremely windy that day, reminding us this is the region of the famed Nor'easter. Plenty of wind for energy supply. Just two days later, Google unveiled a major commitment to wind power, by funding new transmission lines off the Atlantic Coast during the next five years.

"When built out, the Atlantic Wind Connection (AWC) backbone will stretch 350 miles off the coast from New Jersey to Virginia and will be able to connect 6,000 MW of offshore wind turbines," Google said. "That's equivalent to 60% of the wind energy that was installed in the entire country last year….

"The new project can enable the creation of thousands of jobs, improve consumer access to clean energy sources and increase the reliability of the Mid-Atlantic region's existing power grid."

Exactly the same benefits derive from drilling for natural gas, where there is a surplus of opportunity. Wood Mackenzie says that in the 22 U.S. shale plays it follows, some 650 trillion cubic feet of gas equivalent can be developed, or 32 years' of gas resource at the 2009 production rate.

If Google likes wind, why not look at a nearer-term investment, clean-burning natural gas that is the bridge to eventual wind power? Apple, Reliance Industries, any sovereign wealth fund with boatloads of cash, should invest in traditional commodity development.

The model is well-established. The latest entrant in a series of oil-and gas-directed deals is China's CNOOC Ltd., which inked a $2-billion joint venture with Chesapeake Energy Corp. in the Eagle Ford shale. (See Company Briefs and At Closing in this issue.)

But this ongoing surge in U.S. gas production is a two-edged sword. Wonderful for the country, it's going to be a problem for industry players for some time to come.

"I'm very pessimistic on U.S. gas prices," said Pioneer Natural Resources Corp. chief executive Scott Sheffield, speaking at Hart Energy Publishing's DUG-Eagle Ford conference and exhibition last month. The San Antonio event drew nearly 2,600 people—testimony that the liquids-rich play is this country's hottest.

But what is hot can burn. At press time, Tudor, Pickering, Holt & Co. Securities Inc. released its latest gas-supply report, on a day when gas traded at about $3.60 per thousand.

"The conclusion to our supply-study update is not surprising…too…much…gas. At the current rig count, our recalibrated supply model predicts 2.5 Bcf a day of annual onshore supply growth, which is well above our estimate of 1 Bcf a day of normalized demand growth. Thus, natural gas prices will have to stay low enough to grab incremental market share from coal, until the rig count falls to balance the market."

Tudor, Pickering made no change to its price deck, still calling for a fourth-quarter price of $4.50 per thousand cubic feet, and in 2011/12, some $5. "But, the bias in the next few quarters is lower," says David Pursell, managing director and head of macro research.

As of October 15, there were 1,670 rigs working in the U.S. and 966 of them were drilling for gas. The cure for low gas prices is fewer rigs drilling for gas. That is happening already in some plays such as the Haynesville and Fayetteville, as operators who have managed to hold their leases with one well per section, can now move iron to oilier plays such as the Eagle Ford and Niobrara.

"At the current gas-directed rig count, onshore supply is growing 2.5 Bcf a day year-over-year vs. our prior prediction of plus-1 Bcf a day," says Pursell.

"The excess supply will require low gas prices to increase price-sensitive gas demand in the power sector (gas taking share from coal). At $60 a ton Appalachia coal, $4 gas results in about 2 Bcf a day of switchable demand."

Pursell thinks reducing the gas-rig count by 100 in the emerging shales (50 in the Haynesville, 25 in Marcellus, 25 in Eagle Ford) would result in a 1-Bcf-a-day reduction in annual supply growth (from 2.5 Bcf a day to 1.5 Bcf a day). But he doesn't see this remedy happening until second-half 2011.