For Every $1 Drop in Natural Gas Prices, Residential and Business Consumers Save $23 Billion Annually
|User||Avg. Price 2008||Spending 2008 (B)||Avg. Price 2011||Spending 2011 (B)||Savings 2011 vs. 2008 (B)|
|Total, 2008||$235.23B||Total, 2011||$151.29B||$83.94B|
Question: How have falling natural gas prices translated into savings for residential, commercial and industrial consumers?
Using data on natural gas consumption and prices from the EIA for the years 2008 and 2011, the table above shows in 2008 annual total spending on natural gas was about $235 billion for residential, commercial, industrial and electric power customers, and by 2011, as a result of falling natural gas prices thanks to shale gas, total spending on natural gas had fallen to roughly $151 billion. Falling gas prices resulted in savings of about $84 billion in 2011 compared to an alternative scenario where gas prices had remained at 2008 levels, which were also representative of gas prices in the previous years back to 2005. Residential customers saved almost $17 billion in 2011 compared to 2008, commercial customers saved $10.5 billion, industrial consumers more than $30 billion and electric power companies more than $26 billion.
Between 2008 and 2011, natural gas consumption was relatively flat for all users, so that the cost savings were entirely due to falling gas prices, and not decreased consumption. For electric power companies, their usage actually increased by about 14% between 2008-2011, but that increased consumption was more than offset by a 43% reduction in the price they paid for natural gas.
Based on the historical consumption and price data, it's possible to make the following estimates of the annual savings on natural gas for every $1 reduction in the price of gas:
Residential consumers save $5 billion annually.
Commercial consumers save $3 billion annually.
Industrial consumers save $7 billion annually.
Electric power companies save almost $8 billion annually.
Total savings of about $23 billion annually.