Last month, the price of natural gas rose about half a percent to $4.310 per million British Thermal Units (mmBTU). This gave market analysts reason to believe that the demand for natural gas will continue to increase into this new year. According to the Energy Information Administration (EIA), about half of the households in the United States utilize natural gas as a heat source, and houses in the Midwest are especially subject to some low temperatures during the winter, making them prime consumers of natural gas.
Market traders have been referencing weekly storage reports for natural gas, and the price of natural gas is up by nearly $1.50/mmBTU from January of 2012. The actual demand for natural gas varies week to week, just like any traded stock. The last report published (as of this writing) on December 19 showed that total demand was down 8.6% from the previous week, where the country faced abnormally low temperatures all over. However, the EIA’s Annual Energy Outlook (AEO) report forecasts that overall demand for natural gas will increase significantly by 2040. The report predicts there will be a 58% increase from 2012’s levels. This report is higher than last year’s outlook prediction due to the increase in shale gas production over the past year.
The highest concentration of this increase will be focused in the industrial sector. It’s estimated the increase will be about 2.5 trillion cubic feet (Tcf); 59% higher than the projected increase last year. The increase will largely be due to increased manufacturing of chemicals and other materials. Electricity production is expected to require a 2 Tcf increase of natural gas between now and 2040. Last year’s outlook expected only a tenth that amount.
The 2014 AEO also expects that the United States will become a net exporter of natural gas by 2017 and exports will rise to about 5.8 Tcf by 2040, which will account for 54% of the total natural gas produced in the country. Additionally, the United States’ imports from Canada are expected to drop from 2 Tcf in 2012 to 0.7 Tcf by 2040.
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