Natural gas demand has increased in the United States by 14 percent since 1990. According to Natural Gas 1998: Issues and Trends, a new report from the Energy Information Administration, rapid growth in natural gas consumption in the electricity generation sector has made a significant contribution to that gain. Electric utility consumption of natural gas rose about 17 percent from 1990 to 1998, from 2.8 trillion cubic feet to 3.3 trillion cubic feet.

The widening use of natural gas as an industrial and electricity-generation fuel is due in part to its clean-burning properties. Its relatively low levels of greenhouse gas emissions, compared with other fossil fuels, could make natural gas a factor in efforts to improve global environmental conditions. In the United States, most new and planned electrical generating capacity is based on the installation of natural gas-fired technology.

Several market developments have also contributed to increased demand:

• The evolution of a restructured, more competitive industry during the past 10 years has contributed to lower overall prices for natural gas. Even greater competitiveness is expected as more States adopt retail unbundling programs. Eighteen States and the District of Columbia now have some form of residential choice program (see figure).

• Interstate pipeline capacity has increased by more than 16 percent during the past decade. In 1998, 47 projects were completed, adding about 10 billion cubic feet per day of capacity to the national grid. A major factor underlying this expansion is the growing availability of new production from Canada.

• Corporate combinations increased in the 1990s as companies looked for opportunities in both the natural gas and electricity industries. This wave of mergers, acquisitions, and strategic alliances does not appear to signal decreasing competition, however. Between 1992 and 1997, the share of total sales accounted for by the top four marketers declined by one-third, while their sales volume more than doubled.

While growth in natural gas supplies is anticipated through 2020, continuing low prices could retard such growth by inhibiting exploration, development, production, and anticipated pipeline expansions. On the other hand, current projections of consumption could be low, if the Kyoto Protocol to control greenhouse gas emissions were to be implemented.

Contact:

Jim Tobin, Office of Oil and Gas

jim.tobin@eia.doe.gov

Phone: (202) 586-4835

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File last modified: May 21, 1999