Natural Gas Supplies Should Meet Growing Demand Stanford - Sep 22, 2003 Sudden price spikes have led to speculation that the United States is facing a critical shortage of natural gas. But a new study by Stanford University's Energy Modeling Forum (EMF) concludes that gas supplies are likely to meet growing demand in coming decades, if policy-makers are able to strike a balance between environmental protection and the need for new energy sources. "Recent volatile natural gas prices do not foreshadow a pending, long-term crisis in future natural gas supplies," said Hillard Huntington, EMF's executive director and co-author of the study. "Industry will respond with more investment, and demand will respond to higher prices - provided that market participants are given the opportunity." According to Huntington, the study is unique because it compared the results from seven different expert modeling teams on multiple market scenarios. The results were reviewed and evaluated by a working group of 45 experts from various universities, government agencies and corporations.
Wild prices "Prices spiked in both 2001 and earlier this year when short-term seasonal bursts in natural gas consumption outstripped the industry's current capacity to deliver natural gas in the winter months," the authors wrote. According to the report, future price spikes could be prevented by constructing more gas storage facilities, building up inventories and implementing longer-term contracts. The result would be greater price stability, which in turn would provide much-needed incentives for private investment in new resources and reduce the need for expensive government-subsidized projects.
Balanced policies Natural gas is considered the cleanest fossil fuel, producing nearly 50 percent fewer carbon dioxide emissions than coal. But concerns about the environmental impact of drilling in Western states, along with restrictions on building terminals for imported liquefied natural gas, have limited supplies, according to the EMF study. "The United States needs to avoid a situation where industry and power plants shift strongly to natural gas for environmental reasons, but where regulations on Western land use and on siting import facilities restrict investment," the authors maintained.
Projected demand and supply Technological advancements in coal, nuclear and other energy sectors could reduce demand for natural gas, the authors wrote. However, the report found that renewable technologies, such as wind and solar power, will have a relatively minor impact on natural gas markets in the next 20 years but could become important alternatives in following decades. Investments in new natural gas supply resources and technologies play a critical role in these projections, the authors found. Coalbed methane, sandstone reservoirs (known as "tight sands") and other less traditional sources of natural gas will become increasingly important in meeting the demand. International trade also will become more prevalent in U.S. markets, either as liquefied natural gas or as direct imports from Canada.
Price competition These demand adjustments are critical for more stable natural gas prices. If environmental policies allow demand to shift away from more expensive natural gas, they will help to limit natural gas price increases. After removing the effects of inflation, the projected price of natural gas in 2020 could be as low as 58 percent of today's level or as high as 118 percent, depending upon the model and scenario: "Higher natural gas prices result when oil prices are higher, drilling productivity is lower or economic growth is higher." The Energy Modeling Forum was established in the Stanford School of Engineering in 1976 to help improve the use of modeling for understanding complicated energy and environmental public policy problems. A list of EMF sponsors is included in the report. Community Email This Article Comment On This Article Related Links "Natural Gas, Fuel Diversity and North American Markets," SpaceDaily Search SpaceDaily Subscribe To SpaceDaily Express Powering The World in the 21st Century at Energy-Daily.com
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