Economic Growth Pushes Up Demand for Natural Gas Commodities - dummies

Economic Growth Pushes Up Demand for Natural Gas Commodities

By Amine Bouchentouf

You need to be bullish on natural gas commodities during times of economic growth. Demand for natural gas rises from commercial users like schools, hospitals, restaurants, movie theaters, malls, and office buildings during times of increasing economic activity.

About 40 percent of the energy consumed by commercial users comes from natural gas, accounting for about 15 percent of total natural gas consumption.

[Credit: Source: Energy Information Administration]
Credit: Source: Energy Information Administration

One place to look for important economic clues that affect demand for natural gas is the Energy Information Administration (EIA), a division of the U.S. Department of Energy (DOE). The EIA provides a wealth of information regarding consumption trends of key energy products, such as natural gas, from various economic sectors.

Natural gas is also quickly becoming a popular alternative for generating electricity, with just less than 25 percent of natural gas usage going toward generating electricity. Actually, natural gas is used to produce approximately 10 percent of electricity generation in the United States. As you can see, that figure will increase dramatically in the coming years.

[Credit: Source: U.S. Department of Energy]
Credit: Source: U.S. Department of Energy

The long-term trend is that more natural gas will be required to generate electricity. This increased demand from a critical sector will keep upward pressures on natural gas prices over the long term. Keep this in mind as you consider investing in this commodity.