The depressed housing market limited residential gas consumption.
New York, NY (PRWEB) July 03, 2014
The Natural Gas Distribution industry has been leaking revenue over the past five years, due to dismal domestic natural gas prices. In the five years to 2014, Canadian retail natural gas prices are expected to fall at an average annual rate, due to the North American shale gas boom. In response to low shale gas prices, government utility regulators cut retail gas rates charged to consumers. Additionally, wholesale gas prices rapidly dropped, because gas marketers and brokers quickly underbid each other in an attempt to attract more customers.
According to IBISWorld Industry Analyst David Yang, “In contrast to prices, natural gas consumption was stable over the past five years, though it suffered setbacks following the recession.” Industrial gas demand slowed because the manufacturing sector contracted during the recession. The depressed housing market also limited residential gas consumption. Nevertheless, natural gas is a necessity for nearly all sectors of the economy, which sustained stable consumption levels. In the five years to 2014, natural gas consumption is estimated to increase.
Moderate consumption growth was unable to make up for deteriorating prices. IBISWorld expects industry revenue to fall over the five years to 2014, mostly matching Canadian natural gas price trends. Revenue rebounded in 2013, and is anticipated to slowly increase in 2014, as prices recover from multiple years of decline. Similar to revenue, industry profit margins have suffered due to falling gas prices. Government utility regulators set lower retail gas rates and wholesalers underbid each other, both of which quickly lowered industry profit margins.
Over the five years to 2019, “IBISWorld forecasts that revenue will rise at an annualized rate,” says Yang. Canadian retail gas prices are projected to increase at an average annual rate over the period. In addition, pipeline infrastructure will expand, which makes it easier for gas extractors to export gas to international markets. As a result, domestic gas prices will converge upward to global gas prices. As gas prices increase, utility regulators will allow industry operators to charge higher retail rates, bolstering gas distribution revenue growth. Wholesalers will also have more arbitrage opportunities, because the pipeline expansion improves the ease of transportation gas across the country.
For more information, visit IBISWorld’s Natural Gas Distribution in Canada industry report page.
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The Natural Gas Distribution industry distributes natural gas to manufacturers, businesses and consumers through utility gas pipelines. Industry establishments are also comprised of natural gas marketers, who purchase and sell natural gas on wholesale markets. This industry does not include long distance gas transportation operators.
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