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Higher Natural Gas Prices Unlikely Says Study

The Bipartisan Policy Center published a study in May 2013 about the U.S. gas market and its supplies, entitled “New Dynamics of the U.S. Natural Gas Market”. This interesting research was part of the New Dynamics of Natural Gas Supply and Demand project. This project looks at new gas supplies in the U.S. and methods to improve the economic and environmental impacts of the energy industry. This current work builds on past reports on shale gas and on ensuring the stability of natural gas markets.

Specifically, the study looked at the potential impact of increased use of natural gas, taking into account various assumptions about future natural gas supplies. It examined increasing demand for natural gas from sources like industry and power stations as they replace coal with gas. The report concentrated on two main issues: 1) the price impact when multiple demand drivers increase demand at the same time; and 2) how the impacts would vary with either high or low gas production output. Even when the demand for natural gas rises in several areas, the report found that natural gas prices were unlikely to rise significantly. In other words, even when the supply is low and the demand is high, the peak prices of gas that were seen in past years would not be reached again. Significant increases in gas exports from the U.S. are also not likely to increase prices.

The report determined that most of the growth in natural gas will be driven primarily by economic growth combined with the switch from coal to gas for power plants and industrial use. The report also stated that natural gas vehicles will likely continue to get more popular and may make great gains in the market by the year 2035. The report also concluded that the United States is in a favorable and unique position to take advantage of various factors, including the environmental, energy and economic security benefits that our country’s natural gas reserves allow. Natural gas can improve both the energy and environment sectors, while promoting a growing economy and more jobs.

The Bipartisan Policy Center hosted a conference in July 2013 on the economic and geopolitical potential of the U.S. shale gas reserves. A central theme of the conference was that global markets for natural gas move a lot faster than our government’s policies. The quick pace of change makes it hard to predict potential customers for U.S. gas. Usually the U.S. Department of Energy grants applications for exports to countries with free trade agreements with the U.S., but is more sporadic in granting export applications for countries that do not–sometimes granting export licenses on the basis of U.S. national security interests. The U.S. is also limited in its ability to use gas supplies as a foreign policy tool because there are an abundance of global suppliers right now. A sensible suggestion was made at the conference that the U.S. should update its 20 year old law on gas exports, since the current law was written when the focus of the U.S. was to import, not export, gas.

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