The Energy Information Administration contends changes in U.S. natural gas production and prices provide strong evidence that a combination of improved efficiency and technology has fundamentally altered the gas supply process.
In a new report, EIA notes U.S. gas production rose 15% in 1985-94 while the average U.S. wellhead price declined 45% in constant dollars during the same period.
Average U.S. monthly wellhead prices generally declined in 1994. A 20% drop during July-October contributed to the lower average price for the year compared with 1993. For 1995, prices through May averaged 22% less than in the same period in 1994.
EIA also said seasonal fluctuations of gas production and wellhead prices have been significantly reduced the past 3 years despite highly seasonal consumption patterns. It said reduced seasonal fluctuations have resulted in improved utilization of production facilities.
Natural gas imports have increased, even as domestic production rose during the last 8 years. Imports of gas from Canada now supply more than a third of the gas consumed in the Northeast and Pacific regions.
Since 1985, lower costs of producing and transporting gas have benefited consumers. By 1994, the average price paid by residential consumers in real terms was 22% below the 1985 price. The average price paid by electric utilities declined by more than 50%.
More benefits
EIA said consumers may see additional benefits as states examine regulatory changes aimed at increasing the efficiency of local distribution companies (LDCs) and providing consumers more choice and flexibility in their gas service.
The electric industry, projected to be a major growth market for gas, is being restructured in a fashion similar to the recent restructuring of the natural gas industry.
Changes in electric industry efficiency and productivity will determine the need for new generating capacity and hence the role of gas in meeting future electricity demand.
Natural gas pipelines and LDCs are increasing their business opportunities by diversifying into other energy services. For example, some companies have formed marketing units while some have made strategic alliances with electric utilities, EIA said. n
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