U.S. natural gas consumption expected to climb

Total gas consumption in the U.S. declined steadily from a peak in 2019 of 85.3 Bcf/d to 83 Bcf/d in 2021, but is expected to climb again this year, according to data recently released from the U.S. Energy Information Administration.

U.S. natural gas consumption fell between 2019 and 2021 because of lower economic activity caused by the COVID-19 pandemic. The decline in natural gas used in the electric power sector, the largest single consuming sector, fell 3% last year, reversing four years of annual growth. That decline among power producers pulled down total consumption. Natural gas consumption rose slightly or remained flat in all other key sectors. In 2021, consumption by both the commercial and industrial sectors rose by 0.2 Bcf/d, and residential natural gas consumption remained flat, the EIA reported.

Power producers turned to alternatives such as coal in 2021 in response to gradually stronger prices that year. Coal prices remained relatively stable as natural gas prices generally rose, the EIA reported.

The spot price for natural gas at the Henry Hub benchmark in Louisiana nearly doubled from 2020 to 2021, rising to average $3.89 per million British thermal units, according to data from Refinitiv.

U.S. natural gas prices rose throughout 2021 because of tighter supply and demand balances, restricted inventories, and weather-related consumption limitations and production outages.

Concurrently, strong natural gas prices on global markets encouraged natural gas exports in 2021. That year, the United States exported 30% more natural gas compared with 2020.

The capacity of natural gas generated electricity plants has continued to increase as coal-fired plants are retired. Despite relatively high natural gas prices, natural gas accounted for 37% of all power generation in 2021, nearly equal to the combined shares the next two largest sources, of coal and nuclear.

Low coal inventories at power plants have limited coal-fired eletricty generation in early summer and early fall, which have subsequently pushed natural gas prices higher, the EIA reported.

The EIA said it expects natural gas-fired generation to increase by 5% in 2022 because of rapidly rising coal prices and constraints in alternative sources of generation.

“We expect total U.S. natural gas consumption to rise by about 5% in 2022, a result of more natural gas consumption across almost all sectors,” the EIA reported.