What do changes in the domestic U.S. natural gas market have to tell us about the world oil market? Hirsch, Bezdek, and Wendling wrote, “The North American natural gas situation provides some useful lessons relevant to the peaking of conventional world oil production.”
Here is their assessment of the North American natural gas situation:
U.S. natural gas demand is increasing; North American natural gas production is declining or poised for decline as indicated in references 53, 54, and 55. The planned U.S. expansion of LNG imports is experiencing delays. U.S. natural gas supply shows every sign of deteriorating significantly before mitigation provides an adequate supply of low cost natural gas. Because of the time required to make major changes in the U.S. natural gas infrastructure and marketplace, forecasts of a decade of high prices and shortages are credible.
Hirsch, Bezdek, and Wendling, “Peaking of World Oil Production: Impacts, Mitigation, and Risk Management,” (2005) p. 36. (Commonly referred to as the “Hirsch Report.” References 53, 54, and 55 are the US EIA Annual Energy Outlook 2000, a 2004 CERA report on gas supplies, and an Oil and Gas Journal article also from 2004.)
Indeed, forecasts of a decade of high gas prices were credible, as many energy experts agreed. But as it has turned out about a year after the report was published U.S. natural gas production began a period of sustained growth, and high gas prices lasted only about 3 years. The planned expansion of LNG imports has turned into a pressing desire to export North American natural gas to Europe and Asia. As of May 17, 2013, two export licenses have been approved and 19 more applications are under review at the US DOE.
Makes me wonder what Hirsch, Bezdek, and Wendling think about the peaking of world oil production now. One clue, from 2010, suggests they no longer draw analogies from the North American gas market when discussion world oil production.