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U.S. Gas Demand Hits New Highs: What Does it Mean for Investors?

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In 2024, the United States has cemented its role as the world’s leading driver of natural gas demand, with power producers significantly increasing gas-fired generation. Over the first nine months of the year, natural gas accounted for a record 46% of the total power generated in the country, reaching 55.6 million megawatt hours, according to LSEG data. This marks a 5% increase from the prior-year level and the highest gas output recorded since at least 2021. Despite global climate commitments and efforts to transition from fossil fuels, the United States remains heavily reliant on natural gas for electricity generation.

U.S. Gas Demand in Global Context

The rapid growth in U.S. gas consumption stands in stark contrast to its climate pledges, with critics pointing out that this reliance on natural gas could undermine the country’s efforts to lead in energy transition. Other major gas-consuming nations like China, South Korea and Japan witnessed smaller increases in gas demand. Yet, the United States now accounts for 30% of global gas-powered electricity, up from 29% in 2023, making it the dominant player in the sector.

This surge in gas-fired power stems from a few key power systems that are transitioning from coal but struggling to meet the growing energy demands without ramping up gas usage. The PJM Interconnection, Midcontinent ISO, ERCOT (Texas), and Florida’s power systems account for the bulk of gas-fired generation. Notably, Florida's gas use increased 13.4%, the highest rise among these systems. As coal plants are phased out, these power systems are expected to rely on gas in future.

The Future of U.S. Gas-Fired Power Generation

Despite international climate targets, the country appears poised to continue increasing its gas-fired power generation until its renewable energy capacity and battery storage infrastructure reach levels that can provide reliable on-demand power. In the near term, natural gas will remain the backbone of U.S. electricity production, particularly in regions where coal plants are being decommissioned.

This dependence on gas highlights a disconnection between U.S. domestic energy trends and the country’s ambitions to reduce fossil fuel usage. The United States will be able to reduce its dependence on natural gas only when its clean power generation reaches sufficient levels.

3 Gas-Focused Stocks to Watch

Given the continued growth of U.S. natural gas consumption, several energy companies are well-positioned to benefit from this trend. We have identified three U.S. gas-focused energy stocks Cheniere Energy (LNG - Free Report) , EQT Corporation (EQT - Free Report) and Kinder Morgan (KMI - Free Report) , which you may keep an eye on.

Cheniere is one of the largest exporters of liquefied natural gas (LNG - Free Report) in the United States. The company stands to benefit from increased demand for U.S. natural gas, both domestically and globally, as it continues to expand its LNG production capacity. The ongoing surge in natural gas demand could boost Cheniere’s export volumes, supporting its revenue growth.

EQT is the largest natural gas producer in the United States, with extensive operations in the Appalachian Basin. As natural gas consumption for power generation rises, EQT’s production capacity places it in an advantageous position to capitalize on the demand surge. The company’s focus on low-cost production and increasing efficiency should drive long-term value as U.S. gas usage rises.

Kinder Morgan operates one of the largest natural gas pipeline networks in North America. As U.S. gas-fired generation grows, the need for reliable infrastructure to transport gas from production centers to power plants increases. Kinder Morgan’s vast network of pipelines makes it a critical player in ensuring the delivery of natural gas to key markets, providing stable cash flows and growth potential.

Conclusion

While the United States aspires to reduce its dependence on fossil fuels, natural gas remains a vital component of the country’s energy mix in 2024. As demand for gas-fired electricity continues to rise, companies like Cheniere Energy, EQT and Kinder Morgan are well-positioned to benefit from this trend. Investors should watch these stocks closely as the country navigates the complexities of balancing energy security with climate goals.


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EQT Corporation (EQT) - free report >>

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