CHICAGO, OCT. 13 -- Natural gas prices probably will continue to fall for the next two years and then remain flat or increase at the rate of inflation into the 1990s, the American Gas Association said today.
An association report also predicted that the United States will have more than adequate supplies of natural gas through 2010 even if energy prices stay the same in constant dollars until the turn of the century.
"This report comes at a critical time for our industry and should contribute to our efforts to boost gas demand," said association President George Lawrence at the national group's annual meeting.
The forecast reversed what the association was foreseeing 10 years ago, when it warned of gas shortages and annual price increases of 20 percent. That happened in the late 1970s.
Since then, however, Congress ended price controls on new gas finds, bringing on vast new reserves of natural gas. Also, federal regulators have worked to establish a more competitive interstate marketplace.
In turn, abundant supplies -- and the collapse of oil prices last year -- led to a steady drop in gas prices.
In 1983, when prices peaked, gas sold for about $6 per 1,000 cubic feet at the retail residential level and $2.90 per 1,000 cubic feet at the wellhead. This year, the retail price averages $5.25 and the wellhead price is $1.60.
Lawrence said he expects prices to fall more until 1989, when he sees supply and demand becoming more balanced and prices staying steady or rising only at the national inflation rate for several years.
Retail prices also could go up if interstate pipelines get federal approval to charge utilities to secure and hold supplies, said association Chairman William Laub Sr.
Lawrence said market equilibrium will be achieved not because of diminishing supplies but because of heightened demand.
U.S. consumption has remained at about 17 trillion cubic feet of gas a year for several years as more efficient equipment offset increasing numbers of gas customers. But the association sees new markets boosting consumption.
Gas is being used increasingly by homeowners in the Northeast and by industries switching from fuel oil. The association also predicts that more gas will be used to generate electricity and to power air conditioners, cars and trucks.
Consumption in 1987 is projected to be 3.5 percent higher than in 1986, and Lawrence said demand probably will rise to 19 trillion cubic feet in 1990 and to at least 22 trillion cubic feet in 2000.
North American supplies also should increase. The industry confounded experts by replacing 96 percent of what it produced last year, despite a decline in prices and exploration.
This means that the excess supply depressing prices, known in the industry as the gas bubble, probably will not subside for another couple of years, instead of this winter as the association had predicted in 1985.
But once the bubble bursts, supplies should keep pace with demand until 2010, the association forecast in its biannual report on supplies.
Based on oil prices of $20 a barrel in 1990, $28 a barrel in 2000 and $40 a barrel in 2010 (oil now sells for about $18 a barrel on the world market), the association said the United States will have available 19.2 trillion cubic feet of gas in 1990, 22.4 trillion cubic feet in 2000 and 23.8 trillion feet in 2010