Management Challenges for the 21st Century
Chapter 14: Challenges in the Natural Gas Industry
Unlike the electric power industry, the natural gas industry has largely worked its way through the mineﬁeld of structural and environmental changes that have rocked the energy industry since the middle and late 1990s. The impact of these structural changes – deregulation, restructuring, and introduction of wholesale and retail competition – have been absorbed into the industry, resulting in what has been described as a far more eﬃcient system than existed before. Restructuring – also called ‘retail unbundling’ – is separating the services necessary to supply gas to consumers into various components that can then be separately purchased. Since restructuring began in earnest in 1996, gas distributors and customers have beneﬁted from lower transportation charges, greater and more reliable supplies, and – until recently – generally lower ﬁnal prices (MacAvoy 2000; MarinerVolpe 2004; Shere 2004). Partially as a result of federally imposed pollution controls, demand for natural gas to fuel electricity generators and industrial processes has expanded signiﬁcantly. Even as demand for natural gas has grown, the maturing of traditional North American production ﬁelds in Oklahoma, Texas, and the shallow Gulf Coast has reduced domestic supply (‘Shallow Gulf Coast ﬁelds’ is a natural gas industry term that refers speciﬁcally to oﬀshore gas and oil ﬁelds that are close to shore rather than in deeper water in the Gulf of Mexico). Together, this tightly balanced supply and demand situation has caused natural gas prices to rise to nearly record highs and to become more volatile than they have ever been. Moreover,...
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