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Page added on November 13, 2014
Cheap Gas?: EIA Projects Natural Gas Prices to Double by 2035
The U.S. Energy Information Agency projects that the price of natural gas will more than double by 2035 measured in constant 2012 dollars. Meanwhile, the same survey projects that steam coal prices will increase by less than 15 percent.
The chart at right was included in the EIA’s Annual Energy Report. Following are key sections of that report.
Natural Gas
The Henry Hub spot price for natural gas in the AEO2014 Reference case is higher than projected in AEO2013 through 2037, with price increases in the near term driven by faster growth of consumption in the industrial and electric power sectors and, later, growing demand for export at LNG facilities. A sustained increase in production follows, leading to slower price growth over the rest of the projection period.
The Henry Hub spot natural gas price in AEO2014 reaches $4.80 per million Btu (MMBtu) (2012 dollars) in 2018, which is 77 cents/MMBtu higher than in AEO2013. After 2020, increases in natural gas spot prices are driven by continued but slower growth in U.S. demand and net exports. The Henry Hub spot natural gas price rises to $7.65/MMBtu in 2040, an increase of $3.28 from 2020 but 4% below the 2040 price projection in AEO2013.
Coal
The average minemouth price of coal increases by 1.4% per year in the AEO2014 Reference case, from $1.98/MMBtu in 2012 to $2.96/MMBtu in 2040 (2012 dollars).
Relative to minemouth prices, the average delivered price of coal to all sectors (excluding exports) increases at a slightly slower pace of 1.0% per year, from $2.60/MMBtu in 2012 to $3.43/MMBtu in 2040.
U.S. coal exports, which have surged in recent years from 50 million short tons in 2005 to a record 126 million short tons (MMst) in 2012, have become an increasingly important source of revenue for both U.S. coal producers and coal transportation companies (primarily railroads and barge companies). In 2012, coal export revenues totaled about $15 billion, representing about 25% of all U.S. coal revenues, despite the fact that coal exports in 2012 represented only 12% of total U.S. production (short tons). In the AEO2014 Reference case, U.S. coal export prices increase by 1.2% per year, to $6.40/MMBtu in 2040.
Electricity
Following the decline of natural gas prices since 2008, real average delivered prices for electricity have dropped consistently (although more gradually) since 2009, to 9.8 cents per kilowatt hour (kWh) in 2012. Retail electricity prices are influenced by fuel prices, and particularly by natural gas prices.
Reliance on natural gas-fired generation remains strong, as a result of additional near-term retirements of coal-fired and nuclear capacity, and natural gas prices continue to influence electricity prices. In the long term, both natural gas prices and electricity prices rise. Electricity prices, which in 2030 are 10.4 cents/kWh (2012 dollars) in the AEO2014 Reference case, compared with 9.9 cents/kWh in theAEO2013 Reference case, continue rising to 11.1 cents/kWh in 2040 in AEO2014, compared with 11.0 cents/kWh in the AEO2013 Reference case.
4 Comments on "Cheap Gas?: EIA Projects Natural Gas Prices to Double by 2035"
rockman on Thu, 13th Nov 2014 7:20 am
“The U.S. Energy Information Agency projects that the price of natural gas will more than double by 2035 measured in constant 2012 dollars.” It’s difficult to believe anyone would give any credibility to such a projection. Which isn’t to say the EIA will be wrong. It’s just that they are making a projection that impossible to make correctly other than by pure luck. They are forecasting a NG price 20 years into the future. So let’s look back in time and see how easy it would have been to make such a prediction. But instead of 20 years let’s just look at 10 years: from 2000 to 2010. Here’s the price that occurred during January for each one of those years:
2000 – $2.10
2001 – $9.80
2002 – $2.00
2003 – $5.20
2004 – $7.00
2005 – $6.20
2006 – $14.80
2007 – $6.20
2008 – $7.10
2008: an odd year: prices spiked during the summer: $13.00
2009 – $5.00
So in just 6 years prices jumped 700%. And then 3 years later fell almost 70%. And the EIA forecast is for prices to increase 100% over twice the time span I just presented. If they EIA wants to really impress us let them forecast the price of NG correctly in just 4 months in March 2015 and also June of next year. If they can’t get close on those numbers in less than a year why would anyone believe anything they said about prices 2 decades out?
Plantagenet on Thu, 13th Nov 2014 11:35 am
Double by 2015? We’ll be lucky if NG doesn’t double by 2016.
ghung on Thu, 13th Nov 2014 11:51 am
Yeah, Rock, your tax dollars at work. I suppose someone at the EIA has to justify their job position by making these useless forecasts. With growing reliance upon natural gas, and all the expectations being raised by the MSM, there’s no telling where prices will go. It seems we are having a cold winter again, and it’s not even winter yet. I wouldn’t be surprised to see prices double before March if this keeps up.
Nony on Thu, 13th Nov 2014 6:20 pm
1. The price in January is influence by weather, much more so than the average for the year, Rock. (Higher variability. Do the math, caldulate SDs.)
2. The article’s headline is a little confused. It’s not just looking at price in 2012 dollars, but looking at a BASELINE of 2012. So, the price is not predicted to rise anywhere near double (in real dollars) from current price. More like almost flat.