Steve Everley: The Market is Moving Toward More Gas, Not Less

[Note: Steve Everley is a Sr. Managing Director at FTI Consulting, and a longtime friend. He published this excellent commentary on LinkedIn, and I thought it deserves highlighting here.]

A common argument against investing in natural gas is that we should not "lock in" more fossil fuel infrastructure. Others say it will become a stranded asset.

The claims are dubious.

In fact, consumers and the broader market are disproving them on a daily basis.

Last year, Washington Governor Jay Inslee (D) criticized federal approval of a natural gas pipeline because he said it "locks in long-term capital investments" in gas and will become a "costly stranded asset." In 2022, California announced a "review" of pipelines to "avoid stranded assets" and which "advances our transition away from natural gas." The Illinois Commerce Commission recently initiated its own "Future of Gas" proceedings with concerns about "stranded assets" and the need for so-called "non-pipeline alternatives" to new gas investments.

But households and other consumers are telling a completely different story: we want gas.

The U.S. natural gas system adds a new customer every minute. Polls also consistently show that Americans have no interest in banning gas stoves or creating other restrictions on consumer choice.

American families don't seem concerned about locking in delivery of the affordable fuel they want.

Many have spent years just trying to get access. In Taos County, NM, residents waited decades to get connected to the natural gas system. This past spring, developers announced a pipeline project was finally moving forward.

"We're excited for it," a local tribal leader said. "We've been working on it since 2006-2007, trying to get natural gas up this way." Estimates show switching to natural gas will save local customers $1,800 per year, a massive relief for a county where the median household income is 25% below the national average.

Last week, Reuters reported that U.S. power generators burned a record amount of natural gas as temperatures rose and air conditioning needs soared. And as Richard Meyer recently pointed out, based on data from the U.S. EIA, natural gas – already the top fuel for power generation nationally – is on the verge of becoming the top primary energy source in the United States.

The president of the New England Power Generators Association recently explained that when the region has closed coal- or oil-fired generation, it's not typically being replaced by wind or solar. It's being replaced by natural gas.

Globally, the picture is similar. Worldwide LNG trade hit an all-time high in 2023. In an analysis released this month, the International Energy Agency said global natural gas demand increased (again) in the first half of 2024.

Claims about "stranded assets" and avoiding fossil fuel "lock in" reflect a disregard for what consumers actually want. The only way these assets will become "stranded" is if the same advocates making those claims successfully lobby for policies to restrict gas. The market is moving toward more natural gas, not less.

Demand matters.