Reasons for the increase in demand for Natural Gas

The price of natural gas is primarily a function of supply and demand in the market. Because there are limited short-term alternatives to natural gas, such as heating oil and electricity generation, during times of high demand, short-term changes in supply or demand can result in large price swings. Price alone is often used to balance supply and demand.

Economic conditions affect the demand for natural gas, especially from producers. Demand may be held back by the price of fuel oil, which can be an economical substitute for natural gas for power plants, producers, and large building owners. Higher demand leads to higher prices, while lower demand can lead to lower prices. The rise and fall of prices cause a decrease or increase in demand.

Here are some reasons for the increasing demand for natural gas:

Time effect:

“Natural gas is hemispheric. I like to call it hemispheric in nature because it is a product that we can find in our neighborhoods,” said George W. Bush.

Seasonal weather, including tropical storms and hurricanes, can have a major impact on natural gas production. These supply-side factors force refiners to slow down or stop production when meteorological phenomena pose a threat to workers and facilities.

Economic growth:

Whenever the economy grows, the price of natural gas also grows. In a strong economy showing good growth, especially in industrial and commercial markets, the demand for this resource is growing. Businesses experience increased demand for goods and services, which in turn increases demand for natural gas as an energy carrier. As more and more sectors of the economy demand natural gas, its price continues to rise. Various industries use natural gas that consumers may not be aware of.

Competition between resources:

The use of natural resources by energy companies and industrial companies changes regularly depending on availability and prices. Usually, these companies try to use the cheapest natural fuel sources to control their own production costs. Due to the interconnectedness of the fuel markets – oil, natural gas, and coal – fluctuations in each other’s interests lower each other’s prices. For example, switching power companies to coal typically reduces the demand for natural gas and oil. When demand falls, prices also fall. Due to the large volume associated with the consumption of natural resources, even a slight decrease or increase in prices can have a marked effect on demand.

Crude Oil Price Fluctuation:

The price of crude oil can affect the use and price of natural gas in a way that coal or other household heating oil cannot. As the price of a barrel of crude oil increases, so do the prices of products produced by producers and refiners, including gasoline. When gasoline prices rise, consumers adjust their travel plans and purchasing strategies. They can take fewer vacations, take shorter trips, and spend less when they do this.

Companies that use petroleum products can also reduce mileage to control overhead costs. Natural gas is an attractive alternative, as many oil-fueled engines can also use natural gas.

Natural gas storage:

The cost of maintaining a natural gas storage facility can have an impact on the final cost to consumers. This underground reservoir, known as the Storage Plains, is an important link in the supply chain for the year-round supply of natural gas to utilities, businesses, and homes. An increase in storage tier costs can lead to a corresponding increase in natural gas prices. Demand and supply also affect storage requirements. Lower demand for natural gas means more storage time, leading to increased costs associated with maintaining storage levels.

Ontario Wholesale Energy Gas & Electric, a division of ONIT Energy Limited founded in 2014, is an innovative and creative boutique Energy Retailer with over fifty years of combined energy experience. Ontario Wholesale Energy is backed by our supply partner Shell Energy North America, allowing us to make large purchases that yield wholesale prices which are passed on to our valued customers.