Explore BrainMass

Major Factors Affecting Natural Gas Demand

Using the natural gas business as an example, can you please help me describe the major factors affecting demand and discuss the major competitors (other suppliers)?

Thank you!!!

Solution Preview

I think I went way overboard here. You now have too much information. This is not a complete paper, of course, but is a series of ideas, statistics and arguments you may or may not want to use.

Actually, the whole thing is pretty interesting, since it has the potential to cause global war, and cause Russia to mobilize against western gas firms in Central Asia.

Not to mention the fact that oil and gas are spending a fortune in Washington, and hiring university professors to argue for their side. As it turns out, much of the economy's future depends on access to cheap fuel. China and Russia do not want the US to dominate this field, and hence, serious diplomatic confrontation is already occurring.


Generally speaking, natural gas moves in cycles. Usually, it refers to the temperature, with the onset of the cold producing a spike in demand. This is also the case for electric demand, since a sizable portion of electricity in the US is created through natural gas. Weather and temperature is a central element of short term demand. In addition, the broader state of the economy is significant. When construction is progressing and the economy developing, demand for gas as a generator of power is substantial. When the housing bubble broke in 2007-2008, the decrease in gas demand fell by almost 10%.

Significant drivers of demand also include the price of oil, prices of gas in Europe (that is, Russian exports to the west), and Chinese demand for the fuel.

There are four sectors of the natural gas industry, and each is affected by demand differently. Residential and commercial buildings and plants, electricity generation, industrial use and transport are the main consumers of gas. Residential gas use makes up about 20% of all American gas consumption. Basic forecasts for the commercial sector are bleak, showing only an increase in gas consumption of about 1% yearly. Commercial buildings and plants account for just over 10% of the gas consumed in the US.

In 2000, the Washington Policy Analysis think tank released a comprehensive study dealing with the future of natural gas. The future of demand and the forces that drive it are complex, but in general, they take a more optimistic view of the growth of demand. Since gas is cleaner and more efficient, there is every reason to believe that it will grow rapidly in all sectors of the economy. They argue that energy use overall in the US in the 1990s fell by 6% primarily because of the increasing popularity of natural gas.

It is also clear that driving demand is technology. In the last 20 years, the efficiency of gas burning units has increased tremendously. Extracting, storing and burning gas is cleaner and more efficiency. New methods of drilling have made previously unavailable fields capable of development. This can only mean a drop in prices and therefore, an increase ...

Solution Summary

The major factors affecting natural gas demand are determined.