Financial Planning

Natural gas represents an important sector of the United States economy. It provides clean burning fuels for industrial and residential use and serves as a major source of commerce. According to some Web sites, there are over 1,500 natural gas distribution companies located within the U.S. It is helpful to understand the details regarding this sector in order to make an informed decision regarding providers.

Natural gas exploration and drilling companies search for the substance and sell it to transportation pipelines. The pipelines transport it and sell it to distribution companies in local areas, who then distribute and sell the natural gas to customers. Prior to the mid 1980s, there was federal regulation regarding the prices that producers could charge to transportation pipelines and that pipelines could charge to distribution companies. The state regulated the price these distribution companies could charge their customers.

This regulation led to little competition and few incentives for innovation or service improvement. It also resulted in gas shortages within the 1970s and surpluses within the 1980s. Today, the industry is deregulated so the price of natural gas is determined by levels of supply and demand. In some states, consumers have the option to purchase natural gas from either a producer or a local distribution company. Most of the natural gas used within the U.S. in produced in this country but some of the supply is imported from Canada.

U.S. natural gas distribution companies own distribution pipes stretching more than 1.2 million miles. Some have a monopoly on their distribution area but, as mentioned above, several states have begun offering consumers options regarding natural gas distributors. Consumers can learn more about this topic by reading information provided by the American Gas Association and the Energy Information Administration.

The Energy Information Administration has some interesting statistics regarding natural gas distribution. For example, natural gas prices are highest in the state of Hawaii and the top producing company is ConocoPhillips Co. The top producing state is Texas and the top U.S. gas fields are in the San Juan Basin, located in Colorado and New Mexico.

Check out my dividend investing website’s latest natural gas stocks analysis.