Industry to Drive US Gas Demand Growth: EIA
US gas demand growth over the next three decades will be driven by increased consumption in industry, while gas use in other sectors will either rise slowly or remain flat, the Energy Information Agency (EIA) said in a report published on February 16.
In its Annual Energy Outlook 2021, the EIA's best estimate is that US demand will reach 35.7 trillion ft3 in 2050, compared with 30.8 trillion ft3 last year, while dry gas supply will climb to 43 trillion ft3 from 32.3 trillion ft3. Consumption in industry will increase by 3.6 trillion ft3 or 35% over the period, accounting for over three quarters of total demand growth. The widened gap between supply and demand will also mean a surge in exports.
Prices will remain subdued, with the Henry Hub spot rate averaging just above $3.5/mn Btu for much of the period. This will spur growth in the US chemicals industry, which relies on gas as a feedstock and a source of power generation.
Gas demand in the power sector will rise by a mere 4% by 2050 to 12.1 trillion ft3, the EIA estimates. This is the same rate of growth that was seen in in 2020, as low prices meant gas displaced coal. The EIA expects demand to contract by 16% this year, however, as a result of prices rebounding. Demand will then increase slowly until 2027, as new generation is brought on stream but older turbines are replaced with more energy-efficient models.
There will also be an uptick in gas demand in transportation over the next 30 years, as more gas is used for heavy-duty vehicle fuel and in freight rail. Residential demand will be flat, while commercial buildings will see only low-to-moderate growth owing to improved energy efficiency.
There was a spike in US gas prices over the past weekend, with spot rates soaring as high as $600/mn Btu in some parts of the country, as the spread of a polar vortex across much of North America pushed gas and power demand to record highs.