On March 14, I shredded the natural gas components of the government’s “Blueprint” of its energy policy because it relied on the existence of dirt-cheap natural gas from the “shale gas revolution.” While the combination of horizontal drilling and hydraulic fracturing (fracking) opened up huge resources in the US, and natural gas (NG) production jumped as a consequence, it also pushed prices far below the cost of production, for far too long. A disaster for an entire industry. An opportunity for its customers. But it cannot last.

Back when the Blueprint was released, NG was truly dirt cheap: $2.28 per million Btu (MMBtu) at the Henry Hub. Storage levels were 48% above the five-year average, after a warm winter had curtailed the use of NG for heating. There was talk that the price would go to zero, as storage levels would reach capacity in the fall, and excess production would have to be flared. Producers cut back on drilling, and by mid-March, Baker Hughes’ rig count had plunged to 670 from 936 in October last year. It was a catastrophic scenario. And the price kept dropping.

It was wreaking havoc in the industry—yet production continued to rise. When NG hit about $1.90 per MMBtu at the Henry Hub on April 19, a decade low, its path to zero seemed assured. Lacking liquefied natural gas export terminals, the US couldn’t even sell its excess production to the energy-starved Japanese who had to pay around $17 per MMBtu on the world markets.

By May, billions in write-offs were pummeling the industry. Chesapeake and other producers were dumping assets to stay afloat. The rig count dropped to 600. Shale gas production was an uneconomic activity at these prices—though by May 23, it had climbed to $2.73 per MMBtu, up 44% from the April low.

The economics of horizontal fracking are horrid. With all wells, production drops over time. But instead of years for traditional wells, decline rates for shale gas wells are measured in months. After a year, production may be down by 80%, after a year and a half by 90%. High production early in the lifecycle allows drillers to show a big upfront profit. Initially, decline rates are obscured by production from new wells. But the more wells they have, the more they have to drill to hide the drop-off in production of older wells! What caught up with them was reality. And they responded by switching to drilling for oil and gaseous liquids, which fetched higher prices, because they had to survive, and producing dry NG wasn’t a survivable activity.

But the benefits of dirt-cheap NG were spreading across the country: households and companies benefited from lower energy bills. Power generators profited from their strategy, launched in the 1990s, of investing in highly efficient natural gas combined-cycle (NGCC) turbines. The building boom of NGCC plants nearly doubled natural gas-fired capacity, at the expense of coal-fired plants—which are being retired at a breath-taking pace. And companies that manufacture plastics, fertilizers, and chemicals from NG are building plants in the US where they can buy their raw material for a fraction of the cost elsewhere in the world.

By June 20, excess inventory levels were plummeting. It had become clear: storage levels would not reach capacity, and NG would not drop to zero. Speculating in NG entered the sweet spot: the price was still way below the cost of production, but the threat of zero had been taken off the table. Timing remained uncertain, but sooner or later the price would have to self-correct, and by nature, it would over-correct. The rig count had fallen to 562—but production was still rising. The price dropped to $2.53 MMBtu at the Henry Hub. Nothing is ever easy. And in the industry, capital destruction continued.

So, when will production finally decline? With drilling activities slowing, production should follow, the theory goes. But there’s a laundry list of reason why it hasn’t happened: producers are now only drilling their most productive wells; drilling technologies have become more efficient, such as pad drilling; finished wells that had been shut in due to pipeline constraints or collapsing local prices, including over 1,000 wells in northern Pennsylvania, are coming on line; dry gas production as a byproduct from the booming oil and gaseous liquids plays is surging; etc.

The EIA’s Monthly Supply and Disposition Balance for July, the latest available, shows that production of dry NG through July was still 6% higher than last year! From April through July, production was up 4.2% over prior year. For data since July, we have to look at the EIA’s weekly figures (available only in percentages), and they’re tapering off: the last week that production was over 3% higher than the same week in 2011 was the week of August 15, at 3.4%. Since then, the differential hovered been between 1% and 2%. Last week, it dropped to 0.6%. So production is still higher than it was at the same time last year (but barely), even as the rig count dropped to 427. Waiting for production to decline is like waiting for Godot.

But demand for dry gas is ballooning. From April through July, which excluded the effects of the warm winter, demand was up a stunning 9.6%. The EIA’s weekly year-over-year demand numbers are volatile, but since late August, the low point was the week of September 12 with a 6.2% increase in total demand over the same week last year; four weeks in that period saw double-digit increases, with the week of October 3 jumping by 18.7%.

This surge in demand has performed what in March would have been considered a miracle: it cut the amount of NG in storage from 48% above the five-year average to 7.1%. Inventory levels now feather the upper limit of the five-year range.

At its current price—recently $3.43 per MMBtu, up 80% from the April low—NG is still dirt cheap, and therefore, demand from power generators and industrial users will continue to be strong. When the heating season kicks off in earnest, weather will be the primary factor for a few months, and cold waves, or the lack thereof, might distract from the surging demand for power generation and industrial use that will gradually put pressure on storage levels even if production refuses to decline.

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