US natural gas consumption to continue decreasing in 2021, 2022
The US Energy Information Administration (EIA) forecasts decreased total US natural gas consumption in 2021 and 2022 following a decline in 2020.
Consumption in 2020 was 1.9 bcfd lower than the all-time high of 85.1 bcfd set in 2019, the agency said in its April Short-Term Energy Outlook (STEO). Total consumption declined as a result of the economic slowdown associated with the COVID-19 pandemic and lower heating demand amid milder temperatures. Although EIA expects natural gas consumption to continue to fall in 2021 and 2022, changes in sector-level natural gas consumption show different trends than in 2020.
Electric power will be the only sector which will consume less natural gas in 2021 after being the only sector to increase its natural gas consumption in 2020, EIA forecasts. Natural gas prices in 2019 and 2020 were historically low, making natural gas more competitive with coal for generating electric power. However, because forecast natural gas prices will be higher and more renewable capacity will come online in 2021 and 2022, EIA expects more electricity generation will come from coal and renewables and less from natural gas.
Residential and commercial natural gas consumption fell by a combined 2.1 bcfd from 2019 to 2020 primarily because of warmer weather and responses to the COVID-19 pandemic.
The warmer weather (which resulted in 9% fewer heating degree days (HDDs) in 2020 than in 2019) reduced demand for natural gas space heating. Based on forecasts by the National Oceanic and Atmospheric Administration, EIA expects HDDs will increase by 5% in 2021 and by 1% in 2022. EIA also expects residential and commercial natural gas consumption will increase in 2021 and then decrease slightly in 2022.
Industrial natural gas consumption is expected to increase in 2021 and 2022 after decreasing by 0.6 bcfd in 2020, EIA forecasts. Although also affected by heating demand, industrial natural gas consumption is more affected by economic trends. As a result of a weaker economy during the COVID-19 pandemic, industrial activity in April 2020, as measured by STEO’s natural gas-weighted industrial consumption index, was at its lowest level since the 2009 financial crisis.
This index reflects the growth of manufacturing subsectors and their relative importance to total natural gas consumption. EIA expects that the index will exceed 2019 levels on an annual basis in 2021 and 2022 as businesses resume operations.
EIA increased the natural gas-weighted industrial consumption index in 2021 and 2022 in its forecast to reflect expectations for economic activity based on IHS Markit forecasts.
Source: Oil & Gas Journal