Natural Gas - Natural Gas Prices

Natural gas prices can vary because of differing federal and state rate structures. Region also plays a role—for example, prices are lower in major natural gas-producing areas where transmission costs are lower. From the mid-twentieth century through the early 1970s, natural gas prices were relatively stable. (See Figure 3.10.) Thereafter, deregulation and industry restructuring brought about a period of sharply rising prices, with wellhead prices (the value of natural gas at the mouth of the well) reaching a high in 1983, declining until 1991, and then generally increasing through 2003. The average price of all categories of natural gas at the wellhead in 2003 was $4.71 per 1,000 cubic feet, sharply rising from $2.84 in 2002.

At the retail price level in real dollars, residential customers paid $8.99 per thousand cubic feet of natural gas in 2003 and $7.61 in 2002. (See Table 3.3.) Commercial consumers paid $7.82 per thousand cubic feet in 2003, while industrial consumers paid $5.47 per thousand cubic feet.

Much of the variation in natural gas prices through the years can be attributed to changes in the natural gas industry. The passage of the Natural Gas Policy Act of

FIGURE 3.8

FIGURE 3.9

1978 (NGPA; PL 95–621) triggered a dramatic transformation in the natural gas industry. The NGPA allowed gas prices at the wellhead to rise gradually. (See Figure 3.10.) On January 1, 1985, new gas prices were deregulated, and additional volumes of onshore production were deregulated on July 1, 1987. In 1988 President Ronald Reagan

TABLE 3.2

Natural gas consumption by sector, selected years, 1949–2003
(Billion cubic feet)
	End-use sectors
		Commercial			Industrial					Transportation				Electric power sector1
						Other industrial
Year	Residential	CHP2	Other3	Total	Lease and plant fuel	CHP4	Non-CHP5	Total	Total	Pipeline fuel6	Vehicle fuel	Total	Total	Electricity only	CHP	Total	Total
1Electricity-only and combined-heat-and-power (CHP) plants within the NAICS (North American Industry Classification System) 22 category whose primary business is to sell electricity, or electricity and heat, to the public. Through 1988, data are for electric utilities only; beginning in 1989, data are for electric utilities and independent power producers. Electric utility CHP plants are included in "Electricity Only."
2Commercial combined-heat-and-power and a small number of commercial electricity-only plants.
3All commercial sector fuel use other than that in "Commercial CHP."
4Industrial combined-heat-and-power (CHP) and a small number of industrial electricity-only plants.
5All industrial sector fuel use other than that in "Lease and plant fuel" and "Industrial CHP."
6Natural gas consumed in the operation of pipelines, primarily in compressors.
7Included in "Commercial other."
8Included in "Industrial non–CHP."
9For 1989–1992, a small amount of consumption at independent power producers may be counted in other "Other industrial" and "Electric power sector."
10For 1999 forward, vehicle fuel data do not reflect revised data. These revisions, in million cubic feet, are: 1999—10,313; 2000—11,365; 2001—13,646; 2002—15,657; and 2003—18,339.
R = Revised.
P = Preliminary.
NA = Not available.
(s) = Less than 0.5 billion cubic feet.
Notes: Data are for natural gas, plus a small amount of supplemental gaseous fuels that cannot be identified separately. Beginning with 1965, all volumes are shown on a pressure base of 14.73 p.s.i.a. at 60° F For prior years, the pressure base was 14.65 p.s.i.a. at 60° F. Totals may not equal sum of components due to independent rounding. Web Pages: For data not shown for 1951–1969, see http://www.eia.doe.gov/emeu/aer/natgas.html. For related information, see http://www.eia.doe.gov/oil_gas/natural_gas/info_glance/natural_gas.html.
SOURCE: "Table 6.5. Natural Gas Consumption by Sector, Selected Years, 1949–2003 (Billion Cubic Feet)," in Annual Energy Review 2003, U.S. Department of Energy, Office of Energy Markets and End Use, Energy Information Administration, September 7, 2004, http://www.eia.doe.gov/emeu/aer/pdf/aer.pdf (accessed September 28, 2004)
1949	993	7	348	348	835	8	2,245	2,245	3,081	NA	NA	NA	4,421	550	NA	550	4,971
1950	1,198	7	388	388	928	8	2,498	2,498	3,426	126	NA	126	5,138	629	NA	629	5,767
1955	2,124	7	629	629	1,131	8	3,411	3,411	4,542	245	NA	245	7,540	1,153	NA	1,153	8,694
1960	3,103	7	1,020	1,020	1,237	8	4,535	4,535	5,771	347	NA	347	10,242	1,725	NA	1,725	11,967
1965	3,903	7	1,444	1,444	1,156	8	5,955	5,955	7,112	501	NA	501	12,959	2,321	NA	2,321	15,280
1970	4,837	7	2,399	2,399	1,399	8	7,851	7,851	9,249	722	NA	722	17,208	3,932	NA	3,932	21,139
1971	4,972	7	2,509	2,509	1,414	8	8,181	8,181	9,594	743	NA	743	17,817	3,976	NA	3,976	21,793
1972	5,126	7	2,608	2,608	1,456	8	8,169	8,169	9,624	766	NA	766	18,125	3,977	NA	3,977	22,101
1973	4,879	7	2,597	2,597	1,496	8	8,689	8,689	10,185	728	NA	728	18,389	3,660	NA	3,660	22,049
1974	4,786	7	2,556	2,556	1,477	8	8,292	8,292	9,769	669	NA	669	17,780	3,443	NA	3,443	21,223
1975	4,924	7	2,508	2,508	1,396	8	6,968	6,968	8,365	583	NA	583	16,380	3,158	NA	3,158	19,538
1976	5,051	7	2,668	2,668	1,634	8	6,964	6,964	8,598	548	NA	548	16,866	3,081	NA	3,081	19,946
1977	4,821	7	2,501	2,501	1,659	8	6,815	6,815	8,474	533	NA	533	16,329	3,191	NA	3,191	19,521
1978	4,903	7	2,601	2,601	1,648	8	6,757	6,757	8,405	530	NA	530	16,439	3,188	NA	3,188	19,627
1979	4,965	7	2,786	2,786	1,499	8	6,899	6,899	8,398	601	NA	601	16,750	3,491	NA	3,491	20,241
1980	4,752	7	2,611	2,611	1,026	8	7,172	7,172	8,198	635	NA	635	16,196	3,682	NA	3,682	19,877
1981	4,546	7	2,520	2,520	928	8	7,128	7,128	8,055	642	NA	642	15,764	3,640	NA	3,640	19,404
1982	4,633	7	2,606	2,606	1,109	8	5,831	5,831	6,941	596	NA	596	14,776	3,226	NA	3,226	18,001
1983	4,381	7	2,433	2,433	978	8	5,643	5,643	6,621	490	NA	490	13,924	2,911	NA	2,911	16,835
1984	4,555	7	2,524	2,524	1,077	8	6,154	6,154	7,231	529	NA	529	14,839	3,111	NA	3,111	17,951
1985	4,433	7	2,432	2,432	966	8	5,901	5,901	6,867	504	NA	504	14,237	3,044	NA	3,044	17,281
1986	4,314	7	2,318	2,318	923	8	5,579	5,579	6,502	485	NA	485	13,619	2,602	NA	2,602	16,221
1987	4,315	7	2,430	2,430	1,149	8	5,953	5,953	7,103	519	NA	519	14,367	2,844	NA	2,844	17,211
1988	4,630	7	2,670	2,670	1,096	8	6,383	6,383	7,479	614	NA	614	15,394	2,636	NA	2,636	18,030
1989	4,781	30	2,688	2,718	1,070	914	95,903	96,816	7,886	629	NA	629	16,014	92,791	9315	93,105	919,119
1990	4,391	46	2,576	2,623	1,236	1,055	95,963	97,018	8,255	660	(s)	660	15,929	92,794	9451	93,245	919,174
1991	4,556	52	2,676	2,729	1,129	1,061	96,170	97,231	8,360	601	(s)	602	16,246	92,822	9494	93,316	919,562
1992	4,690	62	2,740	2,803	1,171	R1,107	9,R6,420	97,527	8,698	588	2	590	16,780	92,829	9619	93,448	920,228
1993	4,956	65	2,796	2,862	1,172	R1,124	R6,576	7,700	8,872	624	3	627	17,317	2,755	718	3,473	20,790
1994	4,848	72	2,823	2,895	1,124	R1,176	R6,613	7,790	8,913	685	3	689	17,345	3,065	838	3,903	21,247
1995	4,850	78	2,953	3,031	1,220	R1,258	R6,906	8,164	9,384	700	5	705	17,970	3,288	949	4,237	22,207
1996	5,241	82	3,076	3,158	1,250	1,289	7,146	8,435	9,685	711	6	718	18,802	2,824	983	3,807	22,609
1997	4,984	87	3,128	3,215	1,203	1,282	7,229	8,511	9,714	751	8	760	18,673	3,039	1,026	4,065	22,737
1998	4,520	87	2,912	2,999	1,173	1,355	6,965	8,320	9,493	635	9	645	17,658	3,544	1,044	4,588	22,246
1999	4,726	84	2,961	3,045	1,079	1,401	6,678	8,079	9,158	645	1012	657	17,586	3,729	1,090	4,820	22,405
2000	4,996	85	R3,098	R3,182	1,151	1,386	6,757	8,142	9,293	642	1013	655	R18,127	4,093	1,114	5,206	R23,333
2001	R4,771	79	R2,944	R3,023	R1,119	1,310	R6,035	R7,344	R8,463	R625	1015	R640	R16,896	4,164	R1,178	5,342	R22,239
2002	R4,890	R74	3,029	R3,103	R1,114	R1,240	R6,316	R7,557	R8,671	R667	1015	R682	R17,346	R4,258	R1,413	R5,672	R23,018
2003P	5,101	71	3,058	3,129	1,123	1,138	5,829	6,967	8,090	635	1015	650	16,970	3,611	1,313	4,924	21,894

FIGURE 3.10

signed legislation removing all remaining natural gas wellhead price controls by 1993.

The NGPA allowed prices to go up, but it also opened the market to the forces of supply and demand. Now that prices are deregulated and the industry is no longer constrained by federal controls, the natural gas industry has become more sensitive to market signals and is able to respond more quickly to changes in economic conditions.