Table of Contents
Principal Factors Influencing Demand3
Residential and Commercial Heating3
Price and Fuel Switching3
Growing Environmental Concern4
Recent Natural Disasters4
Growing Global Demand4
Principal Factors Influencing Supply5
About the Industry8
Natural Gas Price Trends9
The Future of Natural Gas11
Natural gas is a fundamental component of the world's supply of energy. It is colorless, shapeless, and odourless and can be combustible. When natural gas is burned, it gives off a great deal of energy with few emissions. Although many people may think that the gas in their car or the gases in their BBQ are natural gases, they are wrong. Natural gas is mixture of hydrocarbon gases, which were originally created million years ago through the remains of plants, animal, and microorganisms, compressed and mixed with mud which made fossil fuel (naturalgas.org, 2010). Natural gas is called a "fossil fuel" because it is formed from ancient life.
Principal Factors Influencing Demand
The demand of natural gas is increasing every year by, not only commercial businesses but also by the consumer. Several factors that influence the demand for natural gas are as follows:
Residential and Commercial Heating
Demand for natural gas is typically cyclical. The highest demand occurs during the winter when the heating requirements are greater as consumers need warmth from the cold weather. The lowest demand occurs during the summer when heating requirements are low due to the warm weather.
Price and Fuel Switching
Some industrial and electric generation consumers are able to switch between fuels for their energy needs. If the prices of natural gas are high, these consumers may choose to switch to a cheaper alternative (e.g. coal) which results in a decrease in demand for natural gas.
Rapid growth in developing countries is expected to play a large part in the growing demand of natural gas. In the next five years it is predicted that ‘developing economies’ will have energy requirements that are predicted to exceed those of countries that already have a developed. ExxonMobil (2007) stated that, “our energy outlook clearly points to a growing demand for energy globally which reflects improving living standards for millions of people around the world” (Discussion section, Para. 4). Growing Environmental Concern
Governments and businesses are shifting their attention to natural gas as a better source of energy as natural gas burns cleaner than other fossil fuels. In China, the demand for natural gas is expected to rapidly increase as the government starts to focus on improving the country’s air quality, as the cities are heavily polluted by emissions from coal and gasoline.
Recent Natural Disasters
After the recent nuclear disaster in Japan, “the government has shut down 6,800 megawatts (MW) of nuclear generating capacity. Germany followed suit by announcing a plan to shut down all of its nuclear plants by 2022. This has pushed up demand for other fuels, such as natural gas.” (McCallion, 2011)
Growing Global Demand
According to the International Energy Agency (IEA), global demand for natural gas has been rapidly growing and is predicted to rise by 1.5% per annum by 2030. The graph below compares the growth rate of natural gas to other sources of energy.
World Primary Energy Demand CAGR 2007-2030
(Natural Gas - A Fuel of Choice, n.d.)
Oil, coal, and natural gas are currently meeting most of the world’s energy needs as other sources of energy, as others do not compare in terms of availability, versatility, affordability, and scale. However, demand for natural gas is recognized to be the fastest growing fossil fuels as it proves...