Michael Giberson

Domestic U.S. production of natural gas is up. Macroeconomic factors are reducing demand for natural gas. And yet, as Fereidoon Sioshansi points out:

The real surprise is that despite the declining need for imported LNG, the US may end up on the receiving end of much of the global excess production and transportation capacity because of its massive storage.

See the linked article by Sioshansi, from the March 2009 EEnergy Informer, for more explanation. Possibly collaborating evidence comes from the EIA; the most recent Weekly Natural Gas Storage Report shows working gas in storage to be 199 Bcf above the 5-year average of 1,696 Bcf.

So natural gas in the United States may be in for another long stretch of low prices. Bad news for producers, of course, but good for natural gas consumers.

Also good news for electric power consumers since natural-gas fired generation frequently sets the market price for electric power in those parts of the country featuring competitive wholesale markets. Fuel adjustment clauses or more cumbersome regulatory procedures will also, eventually, bring lower power prices to regions that remain dedicated to the old vertically-integrated-regulated-monopoly approach to providing electricity.

HT to Cheryl Morgan at MorganEnergy.


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