So far in 2009, natural gas prices have fallen 51% to US$2.409 per million Btu (British thermal unit) on the New York Mercantile Exchange.
Given the recent surplus in natural gas supplies complicated by shrinking demand due to the severe global recession, it should not come as a shock that natural gas commodity prices have sunk to their lowest levels in over seven years.
Demand for natural gas is likely to more than recover from these losses over the long term. Here’s why.
Natural Gas Energy Facts
According to the US Energy Information Administration, natural gas accounted for 23% of total energy consumed in the United States in 2007.
US Department of Energy statistics show natural gas costs 30% less than electricity. Among fossil fuels, natural gas is the cleanest energy source.
In his analysis The Truth About Fossil Fuels and Renewable Energy (Part II), Joseph L. Shaefer explains that natural gas is a highly compressed and therefore efficient energy source. Just to replace one 1,000 megawatt gas-fired power plant, the U.S. would have to build:
- 500 state of the art wind turbines sprawled over 40,000 acres, or
- 250 high-efficiency solar facilities occupying 20,000 acres.
Energy Uses for Natural Gas
Most people think of natural gas as a fuel for heating and cooking around the home. But demand for this vital component of America's energy supply is diversified across 4 major sectors:
- Residential (35% of U.S. natural gas usage)
- Industrial (25%)
- Electric power (21%)
- Commercial (19%).
Natural Gas Provides Residential Power (35%)
The US Census Bureau’s 2007 report Characteristics of New Housing reveals that natural gas heats or cools 52% of all American homes. And that percentage is growing: 62% of single family homes built in 2007 use natural gas heating – far ahead of electric heat (34%) and heating oil (2%).
This residential infrastructure for natural gas has increased the popularity of gas-powered appliances including barbecues, clothes dryers, fireplaces, outdoor lights and space heaters.
Typically, natural gas appliances have higher initial costs than electric models. However, gas-fuelled appliances are usually cheaper to operate, last longer and require low maintenance costs.
Industrial Uses for Natural Gas (25%)
As is the case for residential power, natural gas is used as an industrial energy source for heating, cooling and cooking applications.
Lesser known is the fact that a small number of industries account for the bulk of natural gas consumption. Manufacturers in chemicals, clay and glass, food processing, metals, petroleum refining, plastic, pulp and paper, and stone industries use over 84% of natural gas consumed for industrial applications.
These are all industrial sectors that the current recession has severely punished, and therefore caused a scale back in natural gas demand.
Natural Gas Generates Electricity (21%)
According the educational website NaturalGas.org, over 50% of the new power plants planned for the United States will run on natural gas. New technology enables natural gas to play an increasingly important role in the clean generation of electricity.
Currently, America’s natural gas-fired plants are running at less than 50%. Joseph L. Shaefer asserts that ramping natural gas plant usage up to 75% capacity would lessen fossil fuel damages to the environment more than what would result from an immediate switch to solar or wind power.
Resembling rechargeable batteries, natural gas fuel cells are growing in importance as a technology that generates electricity. Fuel cells use natural gas to generate electric power even during their usage.
Commercial Uses for Natural Gas (19%)
Natural gas is a popular source of energy for restaurants and other establishments that depend on cooking facilities.
This vital energy source is also heavily used in office buildings, schools, churches, hotels and government buildings for space heating, cooling, cooking and water heating.
In addition, natural gas is often used to run on-site generators in buildings that need to produce their own electricity to meet periods of peak demand. Natural gas powered reciprocating engines, turbines, and fuel cells are all used in commercial settings to generate electricity independently.
In total, natural gas generates about a third of energy that the commercial sector consumes.
Short-Term Demand for Natural Gas
After a relatively mild summer and with consumers mindfully watching their use of energy at home and at the office, it really should not come as a surprise that demand for natural gas power has gone down since the start of this year.
Besides, industrial and commercial applications account for about 44% of natural gas consumption.
With a dramatic slowdown in the global economy, a decrease in demand for natural gas as well as lower prices should be expected – at least as long as the U.S. economy remains in recession and without more signs of a consistent recovery.
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