Natural gas price movements occur as the supply and demand cycles interact. Supply is tight. Because of lag times inherent in matching supply with increased demand, supplies have become tight. According to EIA and publicly available data, the price of natural gas and oil collapsed in 1998 and 1999, resulting in the industry allocating less capital to exploration and production activities. Now that continued strong demand has resulted in the increase in natural gas and oil prices, the industry is able to invest more in production.
Producers continue to do everything they can to bring more natural gas to market.
Tight supply is not a sign of inadequate resources. In 1990 producers had to replace about 10 percent of their natural gas volumes with new wells each year just to bring consumers the same amount of gas they had the year before. Today, this average decline rate has jumped to 23 percent. That means that producers must find 23 percent more gas each year just to satisfy even a stagnant market. This increasing decline rate occurs because our technological advances are allowing us to find fields that in the past were just too small to be economic, but because of their size they experience sharper decline rates.