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North American Natural Gas Demand — Outlook 2020

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  • Salman Saif Ghouri

Abstract

This paper analyses natural gas demand in the United States of America, Canada and Mexico for the period 1980–2001. Visual inspections of the historical trends for natural gas demand, GDP and natural gas prices provide an initial assessment of the relationship between these variables. The paper then estimates various regressions, using the Almon polynomial distributed lag model. Several regressions, utilizing different combinations of explanatory variables, were run with or without an autoregressive scheme of various orders. The best‐fitting model in each country was selected, and this was later used to generate natural gas demand forecasts for the respective countries to 2020. The results show that the income elasticity for Canada is more than unity (1.4), compared with less then unity for the USA (0.8) and Mexico (0.65). Changes in natural gas consumption generally lag by a few years, before the full impact of the changes in gas prices is realised. The length of lags varies between countries, but generally the effect of a price change on natural gas consumption dissipates after three‐to‐four years. Population is one of the important explanatory variables for Mexico, while it is not significant for the USA and Canada. The model predicts that natural gas demand in the USA (base case) will increase at an annualised growth rate of 1.9 per cent and, by 2020, should reach 919 billion cubic metres. This is not very different to the forecast of the US Department of Energy's Energy Information Administration (EIA) (900 bcm). Similarly, the base case forecast for Canada to 2020 is 128 bcm, compared with that of the EIA at 125 bcm. The forecast for Mexico (92 bcm) is significantly different to that of the EIA (120), perhaps due to different economic growth assumptions. The paper concludes that there is an urgent need to enhance exploration efforts and investment in liquefied natural gas (LNG) terminals, to be able to receive LNG from multiple sources, particularly in the USA and Mexico.

Suggested Citation

  • Salman Saif Ghouri, 2004. "North American Natural Gas Demand — Outlook 2020," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 28(1), pages 1-26, March.
    • Handle: RePEc:bla:opecrv:v:28:y:2004:i:1:p:1-26
    DOI: 10.1111/j.0277-0180.2004.00077.x
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    References listed on IDEAS

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    1. Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-248, April.
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    Cited by:

    1. Salman Saif Ghouri, 2006. "Forecasting natural gas prices using cointegration technique," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 30(4), pages 249-269, December.

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