Natural Gas Prices Turn Up Heat on Energy Conservation
By Steve Kiesner Director of National Accounts, Edison Electric Institute | May 04, 2010
For hotel executives, knowing how a hotel uses energy is the first step toward knowing where to start conserving. Water heating alone, for example, accounts for almost 40 percent of a hotel's total energy cost, and two thirds of its natural gas use.
Perhaps surprisingly, the local electric company can help improve a hotel's energy efficiency. Power companies offer energy-saving advice, and many times programs and services, to improve a hotel's overall energy efficiency. These improvements will lead to greater control over a hotel's electricity-and its natural gas-use. They will also help to make the nation's electricity system more reliable and affordable as well.
Natural Gas Supplies Pushed to Limit
In 2003, natural gas prices averaged 60 to 65 percent above those in 2002. Forecasts for 2004 and beyond show that high prices will be sticking around. There is mounting evidence that, after 20-30 years of intensive development, output from some of the largest gas fields in the United States and Canada has reached a plateau. More than twice as many new wells were drilled between mid-2000 and mid-2001 than just two years prior, with almost every available rig in North America actively deployed in the field. Even with this massive increase in development activities, natural gas production never rose by more than 1.4 billion cubic feet per day-an increase of about 2.7 percent. Environmental restrictions and moratoria on gas drilling activity, which are increasing rather than decreasing, will further limit U.S. production levels in the near term.
Given this demand-supply imbalance, higher prices have been the inevitable result. A cold December has pushed natural gas spot prices to $6.711 per MMBtu for January 2004. For the past 15 years, gas prices have mostly stayed below $2.50 per million British thermal units (MMBtu). Some experts predict that natural gas prices will average $5.70 per MMBtu (in constant 2002 dollars) for the next two years and then generally decline to a level around $4.50 per MMBtu for the next 18 years.
Short Term Recommendation: Improve Energy Efficiency