As the economy gains steam, energy needs will increase and downstream customers will purchase natural gas at increasing rates
Los Angeles, California (PRWEB) December 09, 2011
Activity in the US Natural Gas Distribution industry is expected to expand through 2016, according to latest report from IBISWorld. Consumption of gas by the residential and commercial sectors is expected to grow during the five years through 2016, reflecting higher consumer spending and increased business activity. Additionally, growth in industrial production is projected to underpin an increase in industrial demand for gas and boost demand from power generators. Improved industrial conditions will lift the use of electricity, which will increase the need for natural gas electricity generation. Concerns over greenhouse emissions will also contribute to higher demand levels for electricity-generation firms because natural gas is more eco-friendly than coal. As a result of these improving market conditions, industry revenue is anticipated to grow at an average annual rate of 5.8% to $159.1 billion in the five years to 2016.
According to IBISWorld analyst, Justin Molavi, the Natural Gas industry in the United States has been leaking since 2006. Drops in demand from downstream customers have been responsible for most of the decline. First, the recession caused households and businesses to reduce spending and, in turn, energy costs per customer declined. Furthermore, recent discoveries of natural gas in the Appalachian Basin have kept natural-gas prices down in light of the high future supply that is anticipated. Also, state utility regulators prevented many distributors from increasing customer pricing because the cost of delivering natural gas has steadily declined since 2006. As a result of these adverse conditions, industry revenue is expected to decrease at an average annual rate of 2.1% to $120.1 billion in the five years to 2011.
Despite declining demand from most downstream customers, electricity generators and industrial production firms have kept the industry from experiencing more significant revenue declines. As the recession and discovery of natural gas in Appalachia lowered natural-gas prices, electricity-generation firms used natural gas as an input at an accelerating rate. Additionally, industrial producers were still active during the recession, supplying goods to emerging economies. Although these firms were using less energy because of declining domestic demand, emerging economies' demand kept these customers in business and using energy to produce goods. As electricity-generation firms and industrial producers desired increasing volumes of natural gas over the past year, industry revenue actually grew an estimated 5.6% from 2010.
Keeping with 2011's growth trend, the next five years are set to be bright for the Natural Gas industry. “As the economy gains steam, energy needs will increase and downstream customers will purchase natural gas at increasing rates,” says Molavi. In particular, industrial production firms and electricity generators will provide the industry with large increases in business as the demand for electricity and industrial products grows significantly. Also, increased carbon dioxide (CO2) regulation is expected in the United States, which will push electricity generation away from coal and toward natural gas because it uses half the CO2. As a result of these positive trends, industry revenue is anticipated to increase at an average rate of 5.8% annually to $159.1 billion in the five years to 2016.
For more information, including latest trends, statistics, analysis and market share information, download the full report from IBISWorld on the Natural Gas industry
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