Page B9 of today’s Wall Street Journal discussed natural gas and how its role in electricity generation has changed over the last ten years. (See here.) The article made the comment that in the past “…energy traders believed using natural gas to deliver electricity was akin to bringing Dom Perignon to a party where Budweiser would do.” I remember hearing something similar from a utility CEO at the time: “Using natural gas to generate electricity is like taking a shower with Evian water.”
Obviously times have changed. The article had a chart showing natural gas consumption for electricity generation since 1997. If you go to the EIA website there is an interactive chart that can provide annual usage back to 1949. (Here is the link.) Here is a screen shot of that chart:
Next I have a screenshot of power generation from coal and natural gas. You can see that it is only just recently that gas has passed coal as the largest source of US electricity. The interactive version of this chart can be found here.
The article also discussed gas storage levels, and how we are 13% below last year’s level, even though the last winter was warmer than the 10-year average. Here is the latest chart from the EIA showing gas in storage.
When you look at the chart things don’t look quite as bullish for gas as implied by the article because while storage levels are below last year they are still above the five year average. You can find historical storage levels and the latest storage chart on the EIA’s web site here. Also note that it looks like the Wall Street Journal’s article has a typo. Gas storage levels were actually at 2,444 billion cubic feet in the EIA’s May 25th data release, not the more bullish 2,344 BCF in the article. (actually the article said trillion cubic feet instead of BCF, but that was obviously wrong.)
In any event, the article’s point that increased demand for natural gas should be very supportive for gas prices, is a good one, and it is one that could also be supportive for independent power producers generating electricity.