New York, NY (PRWEB) March 07, 2014
Revenue for the Natural Gas Distribution industry has been drained over the past five years. Falling prices ushered in the decline, while low demand during the recession also negatively affected the industry. The shale gas boom resulted in a flood of natural gas in the United States, which, when combined with a shortage of export facilities, triggered a collapse of natural gas prices. Overall, retail gas prices are expected to fall at an average annual rate of 1.7%. As a result of adverse pricing conditions, industry revenue is expected to fall at an annualized rate of 1.4% to $158.0 billion in the five years to 2014. However, the Natural Gas Distribution industry has recovered strongly over the past two years, with gas prices rising as production slows. Revenue grew 17.2% in 2013 and is expected to grow 2.2% in 2014.
According to IBISWorld Industry Analyst David Yang, “Since 2009, natural gas's importance to the economy has grown, with manufacturers and electricity utilities relying more on natural gas as an energy source.” While demand stagnated during the recession, it has steadily recovered as industrial production increased. According to the Energy Information Administration, natural gas consumption is expected to climb at an average annual rate of 2.1% over the five years to 2014. Nevertheless, consumption growth has been unable to offset sharp declines in prices.
“Profitability has increased over the past five years, largely because citygate prices fell at a faster rate than retail prices,” says Yang. While low retail prices hurt revenue, industry operators have benefited from low citygate prices, which represent gas purchase prices for distributors. Additionally, both labor and capital costs have decreased, as operators trimmed their labor force to cut costs. Capital expenses have moderated because many infrastructure projects are already under construction, due to investments immediately following the recession.
In the five years to 2019, natural gas production growth is projected to slow, while infrastructure investments will boost export capacity. Upstream gas extractors will be able to charge higher prices on export markets, and regulatory agencies will set higher retail rates as production decelerates. Over the next five years, US natural gas prices are forecast to increase. Consumption will gradually increase as the economy recovers, and, as a result, IBISWorld forecasts that industry revenue will increase in the five years to 2019.
For more information, visit IBISWorld’s Natural Gas Distribution industry
in the US industry report page.
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IBISWorld industry Report Key Topics
Most Natural Gas Distribution industry operators manage gas distribution systems consisting primarily of gas mains and meters that transport gas to end users. Some companies are gas marketers that buy gas directly 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 that 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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