- In constant dollars, the wellhead price of natural gas has declined from 1983 to 1997 by 44 percent. Price reductions between 1986 and 1997 are particularly striking as they occurred while demand levels grew from 16.2 Tcf to 22.0 Tcf.
- All consumers have reaped the benefits of the lower wellhead prices, as prices to all sectors have declined by more than the decline in wellhead prices.
- The factors behind the decline in prices are varied. Regulatory restructuring of the gas industry promoted increased competition and efficiency. Eventual decontrol of wellhead prices started with the Natural Gas Policy Act in 1978. Orders 436 and 636 then provided the restructuring of the transportation system allowing open access to the transportation system by parties other than the interstate pipeline companies.
- Lower petroleum product prices since 1986 also impacted gas prices as firms tried to avoid loss of customers with fuel switching capabilities. Improved technology increased productivity and helped to manage costs.
- Large industrial customers and electric generations customers, who have the ability to substitute other fuels for natural gas, have benefitted the most to date. Retail unbundling programs at the State levels are intended to extend similar choices to small volume customers.
- Electric power restructuring is expected to promote even greater convergence between natural gas and electricity prices.
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