Natural gas supplies a safe bet

Sudden price spikes have led to speculation that the U.S. is facing a critical shortage of natural gas. However, a study by the Energy Modeling Forum (EMF) at Stanford (Calif.) University concludes that gas supplies are likely to meet growing demand in coming decades if policymakers are able to strike a balance between environmental protection and the need for alternative energy sources.

"Recent volatile natural gas prices do not foreshadow a pending, long-term crisis in future natural gas supplies," assures Hillard Huntington, EMF's executive director and co-author of the study. "Industry will respond with more investment, and demand will respond to higher prices--provided that market participants are given the opportunity."

According to Huntington, the study is unique because it compared the results from seven different expert modeling teams on multiple market scenarios. The results were carefully reviewed end thoroughly evaluated by a working group of 45 experts from various universities, government agencies, and corporations. Uncertainty in the natural gas market is based on large fluctuations in gas prices during the past several years.

Future price spikes could be prevented by constructing more gas storage facilities, building up inventories, and implementing longer-term contracts. The result would be greater price stability, which in turn would provide the necessary incentives for private investment in new resources and reduce the need for expensive government subsidized projects. In the longer run, direct subsidies for expensive projects are not necessary to maintain investment and supplies. Far more effective would be better integration of energy, environmental, and land-use policies.

Natural gas is considered the cleanest fossil fuel, producing nearly 50% fewer carbon dioxide emissions than coal. Yet, concerns about the environmental impact of drilling in western states, along with restrictions on building terminals for imported liquefied natural gas, have limited supplies, the EMF study suggests.

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