During the 1990s, natural gas customers enjoyed relatively stable prices because supplies of natural gas exceeded market demands. Recently, though, customers have endured wide fluctuations in natural gas prices because gas supply and demand are so tightly balanced that any change in market demand or available supply is reflected immediately in changing prices.
The growing discrepancy between increasing demand for natural gas and available supplies could result in continued higher prices for natural gas consumers unless public policies and personal attitudes change about bringing fresh supplies of natural gas to market, according to a report by the American Gas Association. AGA’s report, From the Ground Up: America’s Natural Gas Supply Challenge, was issued in December 2002.
The American Gas Association believes that the best way to keep prices reasonable for households, schools, factories, electric power-generation plants and other natural gas customers is to ensure that supplies meet anticipated demand. Increased natural gas supplies must come from two sources, according to From the Ground Up:
- Traditional supplies (onshore and offshore wells in the U.S. and Canada), which meet most current U.S. natural gas needs. Natural gas production will continue to “migrate,” such as to deeper waters of the Gulf of Mexico and to Rocky Mountain basins. Areas that are currently off-limits to gas production must also come into play.
- Nontraditional supplies, such as Alaska natural gas and liquefied natural gas (LNG), will help bridge the supply gap. In part, this will require construction of a pipeline to transport natural gas from Alaska to the lower-48 states and promoting expansion or construction of LNG import and storage terminals.
Federal and state officials must take the lead in overcoming a pervasive “not in my backyard” attitude toward energy infrastructure development; and current restrictions on access to new sources of supply must be re-evaluated in light of technology developments that have reduced the costs, uncertainty and environmental impact of gas exploration and production.