NATURAL GAS MEMO HIGHLIGHTS SUPPLY-DEMAND STRAINS  Ryan Puts CRS Memo on Natural Gas Prices on Website

JANESVILLE – First District Congressman Paul Ryan requested and recently received a memorandum from the Congressional Research Service (CRS) about the increases in natural gas prices that occurred in recent months. Today he posted a copy of the CRS document on his website (see below).

The memorandum details the market factors that have been having an impact on the current natural gas situation. In describing the conditions that may have contributed to this year's sharp rise in natural gas prices, the author of the memo states:

"During the 1990s, the total supply of natural gas from U.S. production and imports grew steadily until 1996. Domestic production declined by about 5% between 1996 and 1999, and imports – chiefly from Canada – do not appear to have risen enough to completely make up the difference. Despite the slightly lower apparent supply and underlying demand that may well be growing, prices remained stable until 2000. … By the second half of 2000, however, steadily growing gas demand by new gas-fired power plants began to consume the gas supply left over from the warm winter. Much of the supply that might have gone into storage for the current winter was burned. As winter 2000-2001 approached, power demand remained strong and prices began to rise sharply."

On a positive note, the memo goes on to state how gas well drilling has increased lately, with the memo's author remarking: "Given that the amount of drilling in the last half of 2000 was twice that of the first half of 1999, much of the increased gas supply resulting from those efforts should be available on markets sometime during 2001."

"This memo describes a situation where growing demand was not matched by supply in time to prevent this winter's natural gas bills from soaring," said Ryan. "Now it appears the market is correcting for this to some extent. While that's welcome news, it doesn't mean we should stop paying attention to developing a forward-looking energy policy – a policy that anticipates these kinds of scenarios and clears the way for quick responses to imbalances in supply and demand."

 

Congressional Research Service Memorandum -  
Natural Gas Prices

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