Friday, September 25, 2009

Decline in Industrial Natural Gas Consumption Tied to Influences Other Than Recession

/PRNewswire/ -- Economists at C. H. Guernsey & Company have determined that the decline in industrial natural gas consumption since January 2008 is partly associated with a long-term trend in energy efficiency and structural changes to the economy and is not solely related to the effects of the recession. The Energy Information Administration reported that U. S. industrial natural gas consumption declined by approximately 14% during the recessionary period since January 2008 for a net average monthly decline of 80.4 Bcf. In fact, the Guernsey economists, Don Murry and Zhen Zhu, also found that if the price of natural gas had not declined by nearly 50% over the same period, industrial natural gas consumption probably would have declined by over 19%.

Murry and Zhu found that only 73 Bcf per month was a direct effect of the decline in economic activity. This is the rate at which the natural gas industrial sales are likely to expand even with a strong economic recovery, and this is only if prices stay near their current level. The economists associated the remainder of the decline with longer- term trends reducing gas consumption per unit of industrial output such as improvements in energy efficiency and changes in the economic structure.

As a corollary to their modeling, they determined that fuel switching had little effect, either positively or negatively, on the level of industrial natural gas consumption during this period. This is very likely because fuel oil prices declined at similar rates during the period. A brief explanation of the study can be found http://www.chguernsey.com/ema.

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