Natural sui gas is an important component in daily life due to its usage because it provides energy for heating in kitchens, businesses, and also used in vehicles. The price of gas depends on various factors. If you are interested in knowing about the gas price, then in this article we have explained how the price of gas is affected by supply and demand.
What is Natural Gas?
Natural gas is a fossil fuel found beneath the earth’s surface due to decomposition by fossils over millions of years. It is made up of a compound known as methane, which is further made up of hydrogen and carbon atoms. It is used in homes, industries,power plants, etc.
What Are Supply and Demand?
To understand the natural sui gas price affected by supply and demand, first you need to understand what supply and demand are.
- Supply: supply is the amount of the gas that is available for sale. The sale of this depends on how much it produces in that year, how much it stores, and how much it will transport easily.
- Demand: the demand refers to how much gas consumers want to buy. The demand for this depends on weather and alternative energy resources.
The demand and supply create a relationship between the rise and fall of the natural sui gas price. Higher will be the demand of the gas, and lower will be the supply, and the price will rise. If demand is lower and supply is high, then price will fall.
Factors That Affect Natural Gas Supply
- Production Levels
The production of the this gas will directly affect the price of the gas. If the production company extracts natural gas in a larger amount, then it will affect the price of the this gas, lower the price, and increase in supply. On the other hand, if production is lower, then supply will shrink and price will be high.
Production levels depend on the following things:.
- Geological factors: some regions are is rich while others have less.Geological factors depend on how much of the this gas will be extracted from that region.
- Technological advancements: new technologies have made it very easy for the companies to extract the natural gas in a very large amount. Technologies like hydraulic fracturing (fracking) have made it easy to extract this gas in larger amounts.
- Government policies: government policies can also affect the production. For example, if the government offers subsidies for the production, then it will encourage gas companies to increase their production.
- Storage
It is stored in resources; the storage of the this gas helps to manage supply and demand. If the production is low and gas is stored in a higher amount, then it will meet the need of the demand, but if the production is low and it does not meet the demand, then it will raise the price.
- Imports and Exports
It is a global commodity; it can be imported or exported by the countries depending upon their supply and demand. If the country is producing gas in a larger amount, then they can export, and if they are producing this gas in a small amount, then the country will import.
- Infrastructure
The infrastructure in transporting and storing is very important for maintaining supply pipelines. Storage facilities are very important to store this gas. If there is good infrastructure for gas storage, then it will meet the supply and demand challenges. On the other hand, if there is damage or not good infrastructure for gas storage, then it will not meet the supply and demand challenges and badly affect the price.
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Factors that increase and decrease the demand for this gas
Following are the important factors that, due to which there is an increase and decrease in this gas supply.
- Weather
Weather is a factor that affects the demand in a way that in winters there is high demand of the gas for the heating of homes, used in business; on the other hand, in summers there is low demand of the gas due to less usage of heaters or heating systems.
- Economic Growth
When the economy of the country is strong due to the larger number of industries and factories, then it will also increase the demand for gas. Example: If there is high production in the factories, then it will increase the demand for the this gas.
- Alternative Energy Sources
The demand of this gas is also affected by the alternative energy sources. If the alternative energy sources are cheap and easily available, then there will be less demanded. On the other hand, if the alternative energy sources are expensive, there is a high demand for this.
- Government Policies and Environmental Regulations
Governmental policies can also affect the demand for this gas. For example, if the government takes initiatives to introduce use of clean energy like this gas instead of conventional resources like coal, wood, etc.
Environmental regulatory authorities can also impose their policies on industries so that instead of dirtier fuel they use.
Role of price in balancing demand and supply of natural gas
If the price of this gas is very high and demand is also very high, then consumers’s use alternative sources of energy like solar or reduce their energy use; this will decrease the demand for this gas, and also price falls suddenly, and if the price is too low, then producers of the natural gas may reduce their production because it is not profitable for them.
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When both supply and demand are balanced and it is possible the strike of the demand will suddenly increase the price and also possible the sudden increase of the supply of the supply then it will also decrease the price of the gas.
Conclusion
Natural gas is a very essential and clean source of energy and very easy to use. The prices of the natural gas are affected by their demand and supply. If the demand of the gas is high and there is a decrease in supply, then it will increase the price, and on the other hand, if the demand of the gas is decreasing and supply is increasing, then it will reduce the price of this gas. Demand and supply are also dependent on the various factors that will also affect the price directly. Hence, demand and supply of the this gas will affect the price.