Where do you marginal cost numbers come from?
I spend a lot of time talking with producers (as well as major LNG consumers who are now buying reserves) and their view is that the technology curve will further reduce costs. Nor do I get the sense that they are see increasing costs due to the "low hanging fruit" effect where in your words core - or cheaper reserves are exploited and the supply cost curve ramps up.The old hockey stick curve. Most see the supply cost - price curve like a flat grass hockey stick - with significant potential production - over 100 BCF/day sub $5. I have no idea what will happen post 2015 and whether you bet for a price increase will pay off in 2018. But there are no fundamentals out there that would lead to that conclusion. Producers do not see diminishing opportunities - or "a fringe" of less attractive opportunities. They characterize gas development as more like farming - with little of the upstream exploration risk that existed in the past.
So it is just a bet - it may or may not pay off. With respect to your view that the full cycle costs - including all environmental and social costs will drive gas prices up. Any estimates of increased environmental costs associated with fracking are in the 10 to 25 cent range. Carbon taxes and "social costs" are a wild card - but of the energy intensive fuels gas has the lowest carbon footprint as you recognize.
