NGI The Weekly Gas Market Report / NGI All News Access

Economist Predicts Huge Growth in Gas Market

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 constructed.

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 century."

Carolyn Davis, Houston

©Copyright 2000 Intelligence Press, Inc. All rights reserved. The preceding news report may not be republished or redistributed in whole or in part without prior written consent of Intelligence Press, Inc.

Copyright ©2018 Natural Gas Intelligence - All Rights Reserved.
ISSN © 2577-9877 | ISSN © 1532-1266
Comments powered by Disqus