American Gas - November 2012 - (Page 13)

y o u r a s s o c i at i o n at w o r k ask aga The Future of Market Stability A new AGA report describes a natural gas market where robust and diverse domestic supplies meet a broad range of demand possibilities An AGA report released in October assessed market fundamentals, infrastructure assets, and supply potential to form a vision for domestic natural gas that points to relative market stability for the next decade and beyond. The exercise was based on research and analysis by AGA staff and comprehensive energy modeling output from the U.S. Energy Information Administration and consulting firms with expertise in global and domestic energy markets. The following column presents a few of the highlights and conclusions of the report. To see the entire study, visit www.aga.org/promise. atural gas is the nation’s foundation fuel, laying a base for energy security and reliability, emissions reductions, and consumer savings. However, this perspective is very different from views just 10 years ago. At that time, concerns about declines in North American natural gas production contributed to an expectation of market uncertainty and price volatility. After years of relative market calm, the beginning of the 21st century brought not only much higher prices, but also major price fluctuations. Those fluctuations played havoc in the marketplace by stifling demand, spurring customer fears, and contributing to the economic recession. Many factors contributed to this period of instability, including a decrease in gas well productivity, weather incidents that impacted supply or demand, and a perception among industry analysts that demand growth would exhaust domestic production to the point where the U.S. would need to import LNG. Spurred by higher prices, gas producers increased efforts to extract supplies in traditional ways and experimented with untraditional methods to access supplies previously deemed uneconomic. These efforts paid off, and coupled with refinements of established drilling techniques allowed producers to develop economic gas wells in shale formations. As a result, shale throughout North America is supporting resource potential that many supply analysts believe can last into the next century. As the realization that supplies are more than ample for domestic demand took hold, gas prices fell from their 2008 highs. Ironically, demand did not immediately respond to these lower prices. Warm winter weather, near-full storage fields, a housing market that would not rebound, and economic recession contributed to gas prices falling to levels not seen since the mid-1990s. With that said, many forecasters expect natural gas demand to grow during the next few years, with increases in gas acquisition prices. The question is, will the natural gas industry go through another boom-and-bust cycle, with substantial changes in prices? AGA’s view is that such an expectation is less likely to occur today than in the past. Today, market fundamentals support a vision of a future of affordable and relatively stable-cost natural gas resources. Recent changes and realizations within the natural gas landscape have shaped this view, including: • New confidence in the U.S. resource base highlighted by the development of shale gas and the technologies that support its extraction • Regulatory changes to local gas utility rate structures that enable commitments to energy efficiency • Improvements in natural gas appliance efficiency • Discernible environmental benefits attribut- N november 2012 AmericAn GAs 13 http://www.aga.org/promise

Table of Contents for the Digital Edition of American Gas - November 2012

American Gas - November 2012
Table of Contents
President’s Message
Industry News
Ask AGA
Search Engine
In the Know
Part One: Pipelines
Company Profiles
Places to Be
Jobline
Advertisers Index
Noteworthies
Marketplace
Facts on Gas

American Gas - November 2012