Take Home II: US Residential Natural Gas Price Analysis and 2011 Forecast Group E Lars Hult Eric Johnson Matthew Koson Trung Le Joon Hee Lee Aygul Nagaeva.

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Presentation transcript:

Take Home II: US Residential Natural Gas Price Analysis and 2011 Forecast Group E Lars Hult Eric Johnson Matthew Koson Trung Le Joon Hee Lee Aygul Nagaeva Jenny Yaillen The UNIVERSITY of CALIFORNIA SANTA BARBARA

Agenda Significance of Natural Gas in the USSignificance of Natural Gas in the US Data AnalysisData Analysis ForecastForecast

Schematic Geology of Natural Gas Resources

Why Natural Gas? Currently second largest source of energy in the USCurrently second largest source of energy in the US –Used in Transportation, Industrial, Residential & Consumer and Electric Power sectors

Source: EIA, Energy in Brief

Why Natural Gas? Currently second largest source of energy in the USCurrently second largest source of energy in the US –Used in Transportation, Industrial, Residential & Consumer and Electric Power sectors Low foreign dependenceLow foreign dependence –87% of gas consumed in US produced domestically New abundant source, Shale GasNew abundant source, Shale Gas

EIA projects 30% domestic gas production growth, 16% consumption growth, leading to declining imports Source: Richard Newell, EIA, Annual Energy Outlook 2011

US net imports of natural gas expected to decline substantially over forecast period Source: EIA, Annual Energy Outlook 2011

Over the last decade, U.S. shale gas production has increased 14-fold and now comprises about 22 percent of total U.S. production Source: Richard Newell, EIA, Lippman Consulting

Four-fold increase in shale gas production offsets declines in other U.S. supply, meeting consumption growth and lowering import needs

Monthly U.S. Price of Natural Gas Delivered to Residential Consumers ( January 1981-February 2011) Trace Histogram

Correlogram of GAS

Differenced Data Series, DGAS Histogram Trace

Correlogram of DGAS

Seasonally Differenced Data Series, SDDGAS Trace Histogram

Correlogram of SDDGAS

SDDGAS regressed on C, AR(1), MA(12)

Actual, Fitted, Residual Plot

Correlogram of Residuals

Descriptive Statistics, Residuals

Serial Correlation Test

Correlogram of Squared Residuals

Garch(1,1) Model

Actual, Fitted, Residual Plot

Correlogram of Residuals

Histogram of Standardized Residuals

ARCH LM Test

Forecast of SDDGAS

Trace and Forecast of SDDGAS

Trace and Recolored Forecast of GAS

March 2011 Forecasted Value vs. Actual Value