Natural Gas Economy Declining

Monday, May 01, 2006
On the brink of the 21st century, a group of energy experts peered into the future of natural gas, and what they saw was quite promising. To satisfy growing demand, producers could crank out a third more natural gas over the next decade at "competitive prices." It could power the economy for decades to come. Or so said the National Petroleum Council in its 1999 report. But natural gas prices soon headed skyward, with prices charged by producers spiking late last year at nearly five times 1999 levels. This past winter, though starting off warm, saw the average gas-heating household spend a record $867, a 17 percent increase, according to federal data. As for that predicted robust supply, the country's annual gas output has strangely slipped by 3 percent over the past six years. Something is broken in the economics of natural gas, say people inside and outside the industry. The bright dream of an economy built squarely on clean-burning natural gas is slowly deflating. Although the U.S. still derive almost a quarter of the country's energy from natural gas, its share will slip in coming decades, federal forecasters now say. The industry largely blames old fields and self-defeating government policy, but others blame those who work within the industry itself. Industry leaders say they're trying to fix things, but declining gas fields and harder-to-reach new ones are limiting output. While government policy turned less-polluting natural gas into the fuel of choice for new electric plants in the late 1990s, federal rules kept drillers away from vast stretches of public land, the industry complains. Then came last year's hurricanes. However, most drilling restrictions were imposed years ago and added no new impediments to output during the price run-up, say federal energy officials. And the hurricanes only added the latest insult to a market with much bigger, older injuries. Also, reported Forbes, other trends should have cooled off prices. Yes, gas-fired generators did use almost 1 trillion more cubic feet of natural gas last year than in 1999. But at the same time, factories cut back, using almost 1.5 trillion less, federal data show. The country is not running out either. There's enough natural gas to last beyond 65 years - much longer than oil, according to the best forecasts. (Source: Forbes)
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