EMF OP 59: Industrial Natural Gas Consumption in the United States: An Empirical Model for Evaluating Future Trends

This study develops a statisticalmodel of industrial US natural gas consumption based upon historicaldata for the 1958-2003 period. The model specifically addressesinterfuel substitution possibilities and changes in the industrialeconomic base. Using a relatively simple approach, the framework can besimulated repeatedly with little effort over a range of differentconditions. It may also provide a valuable input into larger modelingexercises where an organization wants to determine long-run natural gasprices based upon supply and demand conditions.Projections based upon this demand framework indicate that industrialnatural gas consumption may grow more slowly over the next 20 yearsthan being projected by the U.S. Energy Information Administration(EIA). This conclusion is based upon the assumption that natural gasprices will follow oil prices, as they have done over recent decades.If natural gas prices should lag well below oil prices, as envisionedby the latest EIA outlook, industrial natural gas consumption shouldrapidly expand well beyond the levels being projected by EIA.