Industrial and electric power sectors drive growth in U.S. natural gas consumption
U.S. total natural gas consumption grows from 25.6 trillion cubic feet (Tcf) in 2012 to 31.6 Tcf in 2040 in the AEO2014 Reference case. Natural gas use increases in all of the end-use sectors except residential (Figure MT-39). Natural gas use for residential space heating declines as a result of population shifts to warmer regions of the country and improvements in appliance efficiency.
Consumption of natural gas for electric power generation grows by about 2 Tcf and makes up about 33% of the increase in total natural gas consumption by 2040. Relatively low natural gas prices make natural gas an attractive fuel for serving increased load. Natural gas is also the fuel most often used to replace older coal-fired generation as it is retired.
From 2012 to 2040, natural gas consumption in the industrial sector increases by 2.5 Tcf, an average of 0.9%/year, representing about 26% of the total increase in natural gas consumption. As industrial output grows, the energy-intensive industries take advantage of relatively low natural gas prices, particularly through 2028. After 2028, industrial sector consumption of natural gas continues to grow but at a somewhat slower rate, in response to rising prices.
Although transportation use currently accounts for only a small portion of total U.S. natural gas consumption, natural gas use by heavy-duty vehicles (HDVs), trains, and ships shows the largest percentage growth of any fuel in the projection. Consumption in the transportation sector, excluding natural gas use at compressor stations, grows from about 40 billion cubic feet (Bcf) in 2012 to 850 Bcf in 2040.
Natural gas prices rise with an expected increase in production costs
Average annual U.S. natural gas prices have remained relatively low over the past several years as a result of the availability of abundant domestic resources and the application of improved production technologies. To provide the supplies necessary to meet growth in natural gas consumption and a rise in exports in the AEO2014 Reference case, producers move into areas where the recovery of natural gas is more difficult and expensive, which leads to an increase in Henry Hub spot prices over the projection period. Henry Hub spot prices for natural gas increase by an average of 3.7%/year in the Reference case, from $2.75/million Btu (MMBtu) in 2012 to $7.65/MMBtu (2012 dollars) in 2040 (Figure MT-40).