U.S. natural gas prices are down because high production of natural gas trapped in formerly inaccessible geological formations has resulted in a production glut, and demand is temporarily low. Since February, natural gas prices have not passed $3 per mcf, Kent F. Moors, a professor of political science at Duquesne University and an industry consultant, said Monday.
Moors said the price could jump between $6.20 and $6.50 per mcf by 2016 for several reasons.
One reason has to do with natural gas storage. Coal's share of electric generation will continue to decline, and a possible 110 gigawatts (gw) of coal-powered electricity will be replaced by natural gas by 2020. For every 10 gw that natural gas replaces, the industry needs to produce 1.2 billion cubic feet a day, which is three times the country's current storage of natural gas, said Moors.
Other reasons natural gas prices will jump include commercial vehicles slowly but surely are switching to natural gas, natural gas becoming a more common feedstock for petrochemical production and U.S. exports of liquefied natural gas increasing. Moors said that by 2014, dredging of the Panama Canal, aimed at enabling the waterway to accommodate larger vessels such as LNG tankers, will be complete. That will allow U.S. LNG to be more cheaply exported to Asia.