Fall 2004 Update on Natural Gas Markets

Natural gas markets remain tight (perhaps even more so than a year ago), continuing the trend toward higher and more volatile prices. Although last year's warm winter and cool summer reduced demand for natural gas for heating and peak electricity generation, industrial consumption of natural gas rose due to the strengthening economy, which increased overall demand for natural gas so that gas markets are still constrained by the deliverability of gas supplies. Hurricane Ivan disrupted Gulf production, and increasing world crude and heating oil prices put significant upward pressure on natural gas markets. Forecasts for a colder than normal winter could further tighten markets. Most market analysts are pessimistic about the prospects for significantly increasing gas supplies in the next 3 to 5 years.

As the American Council for an Energy-Efficient Economy (ACEEE) determined a year ago, energy efficiency and renewable energy continue to offer the most attractive near-term options to rebalance natural gas markets. These cost-effective, consumer-friendly solutions reduce demand for natural gas and can be brought to market quickly, resulting in significant reduction in wholesale prices for natural gas.