Natural gas will be available to meet the country's demands well into the next century but at prices higher than today's level, according to a study recently conducted by the Energy Modeling Forum of Stanford University.
The EMF North American Natural Gas Working Group's findings are based on a set of economic models of four scenarios representing significantly different conditions in the industry - upper and lower oil price trends, a low United States natural gas resource base and an increase in natural gas demand in the electric utility sector. The findings are supplemented by additional analysis of several issues including the direction of regulatory policy and the size of the natural gas resource base.Growing competition in North American natural gas industry has generated uncertainty about its development. According to the report, by the year 2000 gas consumption will grow from the current level of about 18 trillion cubic feet per year to about 19 Tcf per year in the upper oil price scenario, and over 20 Tcf per year in the high demand scenario. However, gas consumption declines to 16 Tcf if oil prices remain low and 17 Tcf if fewer gas resources are available than anticipated.
"Much of the gas consumption decline in the latter two scenarios is due to fuel switching as gas prices rise above oil prices to the consumer using gas equipment that can burn both gas and residual fuel oil," said Glen Schuler, chairman of the EMF Working Group. "Since United States oil production is expected to decline in the future, the additional oil supplies required to satisfy those needs increases our oil import dependency even further in these scenarios."
A major conclusion of the study is that the fuel switching response by dual-fuel industrial and electric utility consumers will be critical in determining gas prices.