Gas Crisis Forum: Prices Pointing Skyward!

Gas prices are likely to remain high in the near term.

There are many possible new sources of supply that could dampen the high-priced natural gas environment in the long-term, but most signs point to a high-price environment in the near-term. One could argue that changes in storage in the production area between years has the potential to start heading north soon, because domestic production capacity between July and the end of 2003 will be larger than last year.¹ This will put downward pressure on prices. But other sources of supply don't look as good. When one looks at Canadian imports, Mexican exports, liquefied natural gas (LNG), the Rockies, and overall demand for gas, the outlook for much lower gas prices by the end of the year is pessimistic.

Canadian Imports and Mexican Exports: How Will They Offset Each Other?

Natural gas imports from Canada were, until the last several years, a major source of new supplies, and often the stopgap source of supplies in the depth of winter. For example, Canadian imports were 21 percent of domestic natural gas production in December 2000, when the average price of gas was near $9.00/MMBtu. Between November and December of 2000, imports rose by 1 billion cubic feet (Bcf) a day.² Without the 1 Bcf increase in Canadian imports, the price would have been still higher.

Yet, Canadian imports will most likely not increase and not be a stopgap source of supplies this year.