On the one hand, natural gas prices have fallen dramatically in recent years. That’s good news for consumers. In addition, natural gas is still more efficient than electricity and other forms of power generation.
But what will happen if we run out of fossil fuels? Will we have enough time to develop renewable energy sources before then? Despite these concerns, some signs indicate that natural gas could have an important place in our energy mix.
The Role of the Natural Gas Industry and Fossil Fuels in Our Economy
Natural gas plays a vital role in the U.S. economy. In fact, every year, America’s natural gas industry produces enough energy to power all of our cars for an entire year—and still leave enough for us to heat our homes!
The natural gas business is integral in many everyday functions, including generating electricity, heating homes and businesses, and creating petrochemicals. Natural gas is also essential for producing hydrogen for fuel cells used in hybrid cars.
One of the most important benefits of natural gas is as a feedstock to create fertilizers and plastics. Since it burns cleaner than coal or oil, it has become an increasingly popular source of electricity generation and liquid fuels.
It is also cheap, clean, and efficient. Natural gas emits fewer greenhouse gases than other fuels when burned; it releases fewer pollutants into the air, which helps reduce global warming and other problems, such as asthma rates.
What Is the Current Natural Gas Production in the U.S.?
Natural gas is the second-most used fuel in the country.
According to the U.S. Energy Information Administration (EIA), natural gas generated 38% of the electricity households and businesses used in 2020. That same year, natural gas was also essential for generating nearly half of all electricity in Texas.
It’s important to note that natural gas doesn’t just have a role in generating electricity—it’s also crucial as a transportation fuel. For example, many public transit buses run on compressed natural gas (CNG) or liquefied natural gas (LNG), both made from refined petroleum products. According to the EIA, CNG vehicles can get up to 20% better fuel efficiency than diesel vehicles.
The U.S. Energy Information Administration (EIA) predicts that production will increase through 2020 and beyond.
The Future of Natural Gas
The natural gas business has been a mainstay of the American energy economy for decades. Still, it’s poised to take on a new role as a bridge fuel that can help us transition to renewable energy sources.
The U.S. is already investing heavily in natural gas infrastructure. As the world’s largest natural gas producer, we produced 34.5 trillion cubic feet in 2021. We expect natural gas production in 2022 to set and break annual records, averaging 98.0 (Bcf/d), averaging between 100 Bcf/d and 101 Bcf/d in 2023. This is approximately 2% more production than in 2022.
This is compared to Russia’s natural gas industry which produced 701.7 billion cubic meters of natural gas in 2021, increasing its production volume from 64 billion cubic meters in 2020.
According to Statista, natural gas production in Russia decreased. From January to October 2022, the Russian company Gazprom produced 344 billion cubic meters of natural gas, 19% less than the corresponding period in 2021.
Current Natural Gas Cost
Currently, natural gas costs are at their lowest in the last ten years. Natural gas now costs, on average, $5.00 per million BTU. According to the U.S. Energy Information Administration, natural gas futures are trading at $5.45 per million BTU, including transportation and delivery to your home or business. If you’re using natural gas on-site or in a wellhead generator, the cost is closer to $4.00 per million BTU.
Natural gas is expected to remain cheap for at least the next ten years, so we can expect to see even more infrastructure development and new technologies that benefit from this resource. This is despite the War in Ukraine; the conflict caused a significant decrease in Russian exports to Europe and a sharp rise in gas and oil prices worldwide.
The Future of the Natural Gas Industry in the U.S.: Trends
Local Distribution Companies Demand
The natural gas industry is booming in the United States, with more than 10 billion cubic feet of natural gas extracted daily. This is creating a massive demand for new pipelines and other infrastructure, which means that local distribution companies are facing an increasing need to invest in their own systems.
Distribution companies in the natural gas business are responsible for bringing the gas from the pipeline to homes and businesses throughout the region. These companies are now facing a growing demand for their services and rising costs associated with maintaining their networks. As a result, they’ll need to find ways of reducing their costs while continuing to provide reliable service to customers.
A report by the U.S. Energy Information Administration predicts that the country will rely on natural gas as its primary energy source for power generation. Currently, natural gas accounts for 34% of total electricity generation in the U.S. The agency’s forecast says that by 2040 the number will increase to 45%.
Demands in Industry
The natural gas business in the U.S. is seeing many trends that will determine future growth.
Natural gas is an energy source for power plants, integral in coal or nuclear power generation. The increase in demand for natural gas by chemical producers and utilities will increase demand for natural gas from other industries, such as manufacturing and transportation.
In addition, natural gas has many new applications, including using it as a feedstock to produce chemicals, plastics, and other products. These new applications will create new opportunities for companies that sell equipment and services related to these new applications of natural gas.
The third trend is increasing exports of liquefied natural gas (LNG) from the United States due to higher prices abroad (in light of the War in Ukraine) combined with lower production costs at home due to technological advances that have made drilling more efficient. This trend will continue until the country has filled all export capacity so that any additional increases in domestic production will not affect prices at home.
Natural Gas Exports
Natural gas exports have been a significant driver in the U.S. natural gas industry. In fact, the U.S. is currently the world’s largest exporter of liquefied natural gas (LNG), with a total capacity of about 11.2 billion cubic feet per day.
The U.S. has also become an essential supplier of pipeline gas to Mexico, which accounts for about 20% of Mexico’s total energy consumption. Mexico relies on natural gas from the U.S. for nearly half its supply, and more imports are expected as we build more pipelines.
The Future of Natural Gas Prices
Natural gas is so attractive because it’s cheap, easy to transport, and has many uses. The new technologies have allowed us to extract more natural gas than ever, with plenty of resources still left to discover. This means that we’ll likely see increased production levels for years to come, which should lead to lower prices for consumers across the board!
So, will the natural gas business still be big in 20 years? According to current trends and predictions, yes. However, it’s essential to remember that several factors contribute to natural gas use and production.
Get in Touch with Navigate Power: Chicago’s Leading Energy Consultants
Navigate Power is your leading resource for market energy trends and usage in the natural gas business. We can help you position your business to take advantage of new opportunities, and we’ll provide you with the tools and education to make smart decisions about your energy use.
Contact us at (888) 601-1789 for more advice from our energy consultants.