Abundant supplies of natural gas from North American shale plays have driven prices down to levels that make end-users and local distribution companies (LDC) smile, observed a Shell Energy North America executive at the LDC Forum last week. But no matter how much the gas industry changes, volatility remains.
"One thing that's stayed constant is price volatility. Volatility as a percentage of price has really stayed pretty constant," Shell Energy North America's Beth Bowman, senior vice president for the west region, told forum attendees in Chicago.
Volatility is good for traders as that's where they make their money; however, Bowman cautioned that LDCs and end-users need to be mindful of how much prices can swing.
Another area to watch is the outlook for industrial demand and economic recovery. Despite population growth, gas demand from the commercial/industrial sector has stayed relatively flat for years, Bowman noted. The prospects for demand growth are mitigated by the nation's transition from an industrial economy to a service economy, she said.
And the recession hasn't helped things either. Still the industry and gas consumers need to be aware that an economic recovery could very well bring an increase in gas demand from the commercial and industrial sector -- and potentially a boost to gas prices, Bowman said.
But since shale gas has gone from about 1% of supply in 2000 to about 20% now, Bowman said she expects prices to remain soft for a while.
"It's my expectation based on some of the things that we've seen that we will continue to have reasonable gas prices for the foreseeable future," she said.
Another area for potential gas demand growth is in power generation. Gas-fired generators will be called on increasingly frequently to backup intermittent renewable power generation, such as wind and solar, Bowman said.
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