EIA predicts U.S. natural gas consumption to fall across most sectors through 2022

Due to higher natural gas prices, the Energy Information Administration’s (EIA) latest Short-Term Energy Outlook predicts that United States natural gas consumption will decline throughout the year and into 2022, especially in the electric power sector.

Total U.S. consumption of natural gas is expected to average 82.5 billion cubic feet per day (Bcf/d) this year — or 0.7 Bcf/d less than last year. While more will be consumed in 2022, it’s still likely to be lower than levels seen in 2020. While this decrease will be felt in most end-use sectors, the industrial sector and other specific uses such as plant fuel, pipeline and distribution use, and vehicle use, are not predicted to feel the squeeze.

Driving the downward trend are higher prices at Henry Hub, the U.S. natural gas benchmark, in the first half of 2021. The EIA expects its price to average $3.63 per million Btu this year — a full $1.60 per million Btu more than the 2020 average. As a result, the organization predicts a coinciding tumble in consumption of 2.7 Bcf/d, or 8.3 percent less consumption for the U.S. electric power sector in 2021. In 2022, this decline will be narrowed to just 0.7 Bcf/d, but with Henry Hub prices still expected to sit at $3.47 per million Btu next year, it is still expected to continue the decline.

Competition with more renewable sources of electricity generation are likely to contribute to the price hikes. Still, in the U.S., when natural gas prices trend upward, generators tend to switch to lower-cost coal, even though coal’s market share has been plummeting for years.