Forecasting Natural Gas Demand, Supply and Prices in the U.S.: Macroeconomic and Policy Implications
Semester
The Capstone project analyzed and researched natural gas fundamentals, energy policy, and evolving technology in order to forecast U.S. natural gas prices over a 10 year time span. Emphasis was placed on one representative industry, electricity generation, to narrow the scope of the project.
First, the Capstone team conducted a literature review of major demand sectors for natural gas including the impact drivers and government policy affecting each sector. The supply side of natural gas was then modeled and forecasted through an econometric analysis on the impact drivers. Subsequently, an analysis of the well production in the U.S. was conducted in order to model the supply side and complete the balance model. Using the output of the model and the literature review, the team assessed the impact of natural gas prices on the domestic economy, future U.S. energy policy and other macroeconomic variables such as employment, trade and GDP.
The project pointed out several key findings. First, it is expected that industrial sectors for which natural gas is a major feedstock such as fertilizer will experience a “Renaissance.” Also, the power generation sector will switch from coal to gas at a higher pace. Nevertheless, the impact on the national GDP is expected to be insignificant since the U.S. economy is highly diversified. Though, the trade deficit will narrow thanks to a boost of the exports. Indeed, the natural gas trade balance is expected to run a surplus in 2016, cumulative net exports from 2014 to 2024 will amount 61.7 billion USD.