Tuesday, January 15, 2013

Utilities Save Natural Gas (Again...)

Utilities continue to play a major role in keeping 2012 natural gas consumption consistently above average, nearly matching production gains.  Year-to-date, utilities have accounted for 7.8 Tcf, or 41.8%, of total natural gas consumption in 2012, compared to 6.4 Tcf, or 35.5%, in the same ten month period in 2011 and 5.5 Tcf, or 32.0%, in the same period in the past ten years. Back in 2002, only 26.7% of natural gas consumed in the U.S. went to utilities.

Natural gas consumption is up 5.6% YTD in 2012 compared to 2011, and it is utilities (+24.2%) and industrial uses (+5.8%) that are more than picking up the slack for the depressed residential (-16.2%) and commercial (-10.9%) sectors.

The difference is even more striking compared to the ten year average, as gas consumption is up 11.3%, buoyed by utility consumption (+45.3%), while residential consumption is down 16.7% and commercial consumption is down 8.2%.

Bottom line:  utilities like cheap gas.  While they have created a floor under gas prices they have also created a ceiling.  Look for utility consumption to drop like Icarus as prices approach $4/MMBtu. The economy's fundamentals need to pick up before gas crosses the $4 barrier.

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