Demand from industrial firms has offset declining residential and commercial demand
Los Angeles, CA (PRWEB) March 03, 2012
The Natural Gas Distribution industry has been leaking over the past five years. 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,” says IBISWorld industry analyst Justin Molavi. Also, state utility regulators prevented many distributors from increasing customer pricing because the cost of delivering natural gas has declined over the past five years. As a result of these adverse conditions, industry revenue is expected to decrease at an average annual rate of 2.2% to $127.6 billion in the five years to 2012.
Despite declining demand from most downstream customers, electricity generators and industrial production firms have kept the Natural Gas Distribution 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, says Molavi.
As the economy gains steam in the coming years, energy needs will increase and downstream customers will purchase natural gas at increasing rates. 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. The industry’s low concentration reflects the local community-based nature of natural gas distribution. Although there has been some merger activity in the industry and the areas supplied have tended to increase as a result, natural gas distributors generally confine their activities to particular regions. For example, major company Sempra Energy operates Southern California Gas Company (based out of Los Angeles) and San Diego Gas & Electric. Other industry players include Atmos Energy Corporation, Pacific Gas & Electric Company, NiSource Inc. and AGL Resources. For more information, visit IBISWorld’s Natural Gas Distribution report in the US industry page.
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IBISWorld industry Report Key Topics
Most firms in this industry operate gas-distribution systems consisting primarily of gas mains and meters that transport gas to end consumers. Some firms are gas marketers that buy gas from the well and sell it to a distribution system, while others are gas brokers or agents that arrange for gas to be sold via distribution systems others operate.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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