A cold, harsh winter will increase demand and drive up prices. There are also many factors that influence supply. Much of the natural gas produced during the summer months is placed in storage and used to supplement gas supplies during the winter months when demand is heaviest. Prior to 1998, Canada produced more natural gas than we needed but limited pipeline space prevented export of the surplus gas to the United States and kept prices artificially low. However, in 1998, pipeline expansions enabled surplus gas to be exported to the United States, and marked the end of excess supply in Canada.
Production is another major factor effecting supply.
Since the 1960s, the average size of a natural gas reservoir has shrunk from 25 billion cubic feet to 1.6 billion cubic feet, and many wells today produce just over half a billion cubic feet. Some areas, such as Canada's Arctic, contain rich fields of natural gas but these cannot be developed without significant investment and a pipeline network to transport the gas. With demand increasing and supply struggling to meet the rising demand, the price of natural gas has almost doubled from mid 1999 to mid 2000. These price increases affect everyone, from the residential consumer to the petrochemicals industry to industrial customers.