[BETA] Fortnightly

In the Pulitzer Prize-winning book, , Cambridge Energy Research Associates Chairman Daniel Yergin writes of the oil industry, "This is a story of individual people, of powerful economic forces, of technological change, of political struggles, of international conflict and, indeed, of epic change."

Yergin captures in a few words oil's extraordinary past. Might those words one day describe the next 100 years of natural gas development? Talking with Yergin in early November, I found a man convinced that the forces that shaped a global oil market are at work in shaping a global market for natural gas. I'll be sharing some of his words with you.

But first, aren't we hearing just the opposite from a chorus of naysayers-that natural gas could prove more of a problem than a solution?

On the whole, energy experts have touted LNG as a useful tool to diversify America's energy mix. But after this year's run-up in natural gas prices, and forecasts for more of the same, many policymakers now see our growing dependence on natural gas as a liability:

"Over-reliance on natural gas could also have serious economic consequences-including higher prices, greater price volatility, and outright shortages," EPRI conlcuded in a report on energy security and fuel choices released in August.

"Americans had a first taste of this in the winter of 2000-2001 when wholesale natural gas prices quadrupled in a matter of months," the study continues. "This price spike disrupted regional economies, hurt energy intensive businesses and their employees, and made it costlier for people to heat their homes. Such events awaken us to the limits on gas supply and the impacts of high prices and scarcity on all gas users."

EPRI says the key to maintaining a diverse fuel mix in the power sector includes "stepped-up research and development for clean coal, renewable energy, advanced nuclear technologies, and more efficient consumer products." A reading of proposed energy legislation that had yet to be passed at press time echoes these recommendations, in addition to natural gas development.

Yergin told me he does not dispute the need to diversify the energy mix, but he says many of these technologies-nuclear and coal, for example-may not develop soon enough or in the scale required to meet the demands of America's now-growing economy. In fact, he believes that a global market for natural gas would ease gas supply shortages and temper price spikes.

The Vanishing Surplus

Yergin and Michael Stoppard, head of CERA's LNG advisory service, wrote in the November/December 2003 issue of : "The United States enthusiastically embraced the new gas-fired technology to generate power. Altogether its use of natural gas in electric power production has increased almost 40 percent since 1990-with much more growth to come. Over 200,000 megawatts of new power-plant capacity has been recently constructed or will soon start production. This is a huge amount of power capacity, equivalent to more than a quarter of the country's entire installed capacity in