EIA says US natural gas prices will continue to fall thorough 2002

The US Department of Energy said Friday that natural gas prices should continue to decline through 2002 as supplies increase.

Energy Sec. Spencer Abraham had directed the Energy Information Administration (EIA) to conduct the study because of broad concerns about tight supplies, volatile prices, and regional price disparities.

Abraham said, “EIA’s analysis is welcome news for US consumers and for our economy. The data clearly shows that the natural gas difficulties of 2000 were not caused by a fundamental inadequacy in the marketplace, such as a serious limitation in stock levels, but by an increase in demand overlaid with a shortage of supply.”

EIA reported natural gas prices are expected to continue declining from $4.09/Mcf in 2001 to $1.96/Mcf in 2002, while supplies should increase from 22.45 tcf in 2001 to 23.53 tcf next year.

The agency said gas prices have declined substantially because additional drilling, mild weather, and a slowing economy have reduced the growth in consumption.

It said prices have returned to levels consistent with historical patterns, and significant price reductions and record storage additions have occurred since May 2001.

“Taken together, these factors indicate that the US natural gas market contains self-correcting mechanisms associated with well functioning markets,” DOE said.

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