Natural Gas Market Evolution in US

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Natural Gas Market Evolution in US Introduction In terms of primary energy consumption, United States of America is world’s second largest country . It is about 19.5% of the world’s share. US consumed 69.7 billion cubic feet per day against the production of 65.7 Billion cubic feet per day in 2012 . Crude oil consumption and production of US in 2012 stood at 18.5 and 8.9 million barrels per day respectively. Looking at statistics, it can be said that US is fairly independent as far as Natural gas is concerned. Natural gas accounted for 27% of the primary energy consumed in US .To reach such a level, the natural gas market underwent a lot of reforms. The case presents the evolution of gas market which consumes nearly 20% of natural gas in world. Nascent stage: State Governments regulated The natural gas business in US has origin from mid 1800s, when it was a byproduct produced from Coal fields. Natural gas was a byproduct and it was largely for consumed in the same locality where gas is produced1. The key for gas delivery then (and even now) is distribution network. Anticipating the opportunity of natural monopoly the local governments stepped in. These governments had a plan of having a single distribution company (in each municipality) and regulate the price it charges. For the supply of gas with in the municipality and in early stages of the gas market having a single distribution company worked. In early 1900s inter municipality trade developed with the growth of Natural gas Industry. Pipelines reaching out of the area of municipal government’s purview lead to the conflict among the governments, leading to a regulatory gap1. Then the respective State governments formed public utility Commissions and Public Service Commissi... ... middle of paper ... ...eral Energy Regulatory Commission (earlier FPC). The FUA restricted usage of natural gas for Electricity generation and in large boilers. Then on FERC gave a series of orders which changed the way in which the business is conducted – Order 380, 436 (Open access), 500 (addressing take or pay obligations), 636 (unbundling). The NGPA aiming at free market pricing, investments flew increasing production. The Repel FUA was passed in 1987, leading to the surge in natural gas consumption. Full deregulation was declared in 1989.Newyork Mercantile Exchange (NYMEx) delivered the first ever future in 1990. Energy Policy act was passed in 1992, promoting electric generation sector leading to setting up of more gas fired power plants. The evolution of the gas market in US is a great learning to the world especially to developing countries like India, Brazil, Egypt, etc.

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