Economist Predicts Huge Growth in Gas Market
Natural gas is the common denominator that will "foster all
reasonable wishes" of environmental groups and still support major
and sustained economic activity for the foreseeable future,
according to a University of Houston economics professor who so far
has been on target in his predictions about energy.
Michael J. Economides, who two years ago predicted the return of
$30-plus prices for a barrel of oil and last year said that natural
gas would "definitely" be selling at $4 Mcf or more this winter,
presented a paper on the revolution of natural gas at the Society
of Petroleum Engineers conference last week in Dallas.
Although it's not well understood, he said that "ironically,"
natural gas will be the fuel of what he and other researchers are
calling the "hydrogen economy," referring to new fuel cell
technology expected to power future vehicles among other things. He
co-authored "Natural Gas: The Revolution is Coming" with R.E.
Oligney and A.S. Demarchos.
"By 2005, the age of hydrogen will dawn, pushed first by fuel
cells running on natural gas or natural gas liquids," Economides
said. This age will come about because the major vehicle
manufacturers already are fine tuning fuel cell powered vehicles.
"A careful check of the fine print in the advertising for the
new fuel cell electricity generator reveals that the fuel cell runs
on hydrogen that is extracted from natural gas or propane. Natural
gas is the common denominator among a flurry of conflicting
opinions on oil prices, energy supply, fuel cells, global warming
and economic development."
Pointing to a "clear momentum toward natural gas in the most
influential of all markets, the United States," Economides said
that "oil and gas companies will produce massive volumes of natural
gas from deep offshore Gulf of Mexico. The necessary lease rights
are in hand, and natural gas is already on an unstoppable path to
become the fuel of choice for space heating and power generation."
He also predicted more development in Canada and Alaska.
Along with fuel cell developments, deregulation will accelerate
the transition to natural gas as the "basic fuel" of the U.S.
economy, and will "erode the market shares for coal and nuclear
power" as new power plants, mostly fueled by natural gas, are
New power capacity will be a problem in the next 10 years, said
Economides, because even when turbine manufacturers catch up in
their three-year backlog of orders, the demand for gas will cause
substantial shortages for "considerable" amounts of time through
both summer and winter peaks.
"We believe that the euphoria of deregulation and intense
competition for a share of the emerging market will result in
excess capacity in the near-term," said the co-authors. This could
result in higher electricity prices for the short term, but
overall, once the construction is completed and the market is
stabilized, Economides and his team said they expect electricity
rates to fall by as much as 30%.
The biggest drawback will be in the political arena. "Building
and facilitating natural gas infrastructure and the adroit use of
taxes and tax incentives can play a very constructive, substantive
role in a social and economic transformation during the 21st
Carolyn Davis, Houston