Natural Gas Markets: Overview and Policy Issues (CRS Report for Congress)
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| Release Date |
May 23, 2008 |
| Report Number |
RL34508 |
| Report Type |
Report |
| Authors |
William F. Hederman, Jr., Resources, Science, and Industry Division |
| Source Agency |
Congressional Research Service |
Summary:
The functioning of the natural gas market in 2007 appeared relatively stable and infrastructure development continued at an appropriate pace. A tighter demand/supply balance for 2008, however, has generated more upward spot price movement in this latest period. From the beginning to the end of the 2007-2008 heating season, the average wellhead price rose more than 30%, according to Energy Information Administration estimates. In the foreseeable future, weather and economic performance appear most likely to influence prices.
Natural gas provided about 22% of U.S. energy requirements in 2007. It will continue to be a major element of the overall U.S. energy market for the foreseeable future. Given its environmental advantages, it will likely maintain an important market share in the growing electricity generation applications, along with other clean power sources.
As Congress seeks to address energy security issues, the increasing importation of liquefied natural gas (LNG) is also a matter deserving careful attention. In 2007, LNG imports reached a record high and plans are to increase this fuel source.
This report provides an update to Congress on recent natural gas market developments and trends that have implications for important energy policy considerations, such as prices, natural gas use for power generation, and liquefied natural gas imports.
From 2006 to 2007, the average wellhead price reported to the U.S. Energy Information Administration (EIA) remained essentially unchanged at $6.39 per thousand cubic feet (mcf), down $0.01. The average citygate price increased about 3% to $6.98 per mcf. Domestic production grew, up about 0.8 trillion cubic feet, and domestic consumption increased more than 1 trillion cubic feet. This was the first increase in end-use consumption since 2004, according to EIA.
Natural gas use for electric power generation increased in 2007 by 10.5% and for the first time became the largest sector for natural gas consumption in the period covered by EIA records. Residential use increased 8.2%, with weather as a major factor. Commercial and industrial consumption also increased, by 6% and 2%, respectively. The industrial growth reversed a decline of 1.5% from 2005 to 2006.
On the supply side, onshore production in areas such as the Rocky Mountains and the Barnett Shales of Texas grew and liquefied natural gas (LNG) imports increased. LNG imports reached a record level of 0.8 trillion cubic feet.
EIA's Short Term Energy Outlook anticipates the Henry Hub spot price increasing almost 20% in 2008, reflecting strong demand, relatively low working gas in storage, and domestic production growth of almost 3%. The Henry Hub spot price did increase about 20% between the first quarter 2007 and first quarter 2008.
This report will be updated. This report supersedes CRS Report RL33714.
