(Published: Fall 1999)

Natural gas has come into its own in the latter half of the 20th century and is now considered to be the nation’s fuel of the future. Demand for the clean-burning fuel is forecast to grow 47% from 1997 to 2020 — a rate faster than that of any other fuel.

Early History

Though natural gas was discovered in the 1600s, transportation limitations prevented the fuel from being widely used for centuries. Early oil drillers often considered natural gas to be a nuisance and vented or burned it off at the well site. Then in the late 1920s, advances in pipeline technology allowed gas to enter new areas. By 1938, the industry was large enough to warrant the passage of the federal Natural Gas Act. Aimed at preventing interstate pipelines from overcharging customers, the act was a major factor that kept prices artificially low for decades.

1945-60: Building Infrastructure

Major improvements in pipeline technology combined with the post-war economic boom led the nation to build an extensive pipeline network for natural gas after World War II. Consumption more than doubled from 1950 to 1960, and natural gas increasingly became a serious competitor to oil and coal.

1978: Deregulation Begins

A critical natural gas shortage during the 1976-77 winter led to the passage of the 1978 Natural Gas Policy Act, a first step toward industry deregulation. The act removed some natural gas price ceilings, and as a result, inflation-adjusted prices nearly doubled in the next five years.

1986: Gas Bubble Forms

Following a rise to historic all-time highs in the early 1980s, natural gas prices fell in the latter half of the decade due to both falling oil prices and an oversupply referred to as the "gas bubble." A major factor contributing to this oversupply was a series of mild winters that lowered residential consumption for heating.

1987: Electric Utility Ban Lifted

Electric utilities freely used natural gas following the repeal of 1978 federal regulations that had inhibited power plant usage in an effort to conserve the fuel for other uses.

1988: Price Volatility Surges

Volatile price cycles that followed seasonal patterns erupted when the industry shifted from long-term contracts to spot market sales in the mid-1980s. Another development that increased volatility was the creation of the natural gas futures market in 1990.

1990s: Growing Markets

Demand rose in nearly every sector in the 1990s, spurred by the low natural gas prices of the late 1980s. In addition, gas became the preferred fuel for power plants following the 1990 amendments of the Clean Air Act, which favored the clean-burning fuel.

1992: FERC Order 636

Aimed at eliminating transportation monopolies, the Federal Energy Regulatory Commission’s Order 636 required pipeline companies to separate natural gas sales from transportation services and to provide open access to all customers.

1998: Prices Fall

Natural gas prices fell in 1998 because of mild winter temperatures, which reduced demand for heating, and because of increased competition from petroleum products as oil prices hit record lows.

1999-2000: Long-term Trend Upward

While natural gas prices remain volatile, the overall pricing trend during the 1990s has risen. Demand for the environmentally friendly fuel has increased steadily during the past decade and is expected to grow faster than that of any other major fuel for decades to come.

The History of Oil and Gas Main Page and Contents

This page was last updated on Saturday, February 08, 2003, at 07:21:41 PM.

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