The Demand for Natural Gas Increases

Because the natural gas market is so heavily dependent on the interaction of supply and demand, it is important to have knowledge of the factors that affect these two components of the commodity.

Throughout the twentieth century, natural gas was known as an ‘energy orphan.’ In North America, natural gas was priced as a byproduct until late 1970s. It was banned as an industrial fuel from 1978 to 1989. There was either too little demand or too much supply. In Europe local supplies made gas ‘slightly important’ commodity. In the 1970s, Liquefied Natural Gas (LNG) was considered a bold experiment for Algeria and Indonesia.

As the cleanest fossil fuel by far, natural gas became known as the most precious energy source. Being extremely efficient, the BTU input to BTU use is 1.1 to 1.0. The big drawback at the time was that it was complex to travel. The pipelines were expensive to construct and they couldn’t go to stranded locations.

The gas demand peaked in 1971/1972 in the United States. It bottomed out in 1985/1986. It finally broke old 1971/1972 record in 2001/2002. It was believed that high gas prices would inevitably destruct the demand for natural gas because of the transportation drawback. This theory proved wrong with U.S. natural gas supply actually peaking in 1973 when daily gas produced was 62 Billion cubic feet (Bcf) per day. Because of the abnormal mild weather between the years 1985 and 2000 the demand growth was dampened. The repeal of banned gas use re-created industrial and electricity feedstock use. By late 1990s, the United States adopted natural gas, as the fuel of choice.

In 2000 the National Petroleum Council (NPC) forecasted the natural gas demand in the United States would increase 36% to approximately 30 TCF by 2010. Half of this predicted growth was created in the electricity demand. The other half was calculated from economy growing by 2.5% per year. It was gathered that gas prices would be kept under $3 through 2015 by improvements made in technology and production efficiency. Many study participants questioned whether the demand could grow this much, but almost no one worried about the supply.

The National Petroleum Council (NPC) forecast was an understated assumption. It predicted 113,000 MW at gas-fired power plants by 2010. The reality is that there were already 220,000 MW gas-fired plants by 2004. The NPC demand was grossly underestimated. The other things overlooked in the assumption were the need for peak capacity, the black-outs or brown-outs that happen, and the weather changes affecting the demand. Bitter cold weather causes demand to rise by 50%. Muggy hot weather causes the electrical demand for air conditioning to rise by 30%. The 60% to 80% of surge now comes from natural gas for this reason.

Taking watch over the increase of demand for natural gas as an energy source, companies like Triple Diamond Energy Corporation keep their business running efficiently in order to meet this demand.