Take Home II: US Residential Natural Gas Price
Analysis and 2011 ForecastGroup ELars Hult
Eric JohnsonMatthew Koson
Trung LeJoon Hee LeeAygul NagaevaJenny Yaillen
The UNIVERSITY of CALIFORNIA SANTA BARBARA
Agenda• Significance of Natural Gas in the US• Data Analysis• Forecast
Schematic Geology of Natural Gas Resources
Why Natural Gas?
• Currently 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 US
– Used in Transportation, Industrial, Residential & Consumer and Electric Power sectors
• Low foreign dependence – 87% of gas consumed in US produced domestically
• New 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)
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Series: GASSample 1981M01 2011M02Observations 362
Mean 8.438398Median 6.965000Maximum 20.77000Minimum 3.940000Std. Dev. 3.369083Skewness 1.147545Kurtosis 3.546429
Jarque-Bera 83.95419Probability 0.000000
Trace Histogram
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GAS
Correlogram of GAS
Differenced Data Series, DGAS
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DGAS
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Series: DGASSample 1981M01 2011M12Observations 361
Mean 0.016814Median 0.040000Maximum 2.580000Minimum -3.200000Std. Dev. 0.696114Skewness -0.726564Kurtosis 6.510438
Jarque-Bera 217.1228Probability 0.000000
HistogramTrace
Correlogram of DGAS
Seasonally Differenced Data Series, SDDGAS
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SDDGAS
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Series: SDDGASSample 1981M01 2011M12Observations 349
Mean -0.003639Median 0.000000Maximum 1.740000Minimum -3.080000Std. Dev. 0.504787Skewness -0.635105Kurtosis 9.192337
Jarque-Bera 581.0628Probability 0.000000
Trace Histogram
Correlogram of SDDGAS
SDDGAS regressed on C, AR(1), MA(12)
Actual, Fitted, Residual Plot
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Residual Actual Fitted
Correlogram of Residuals
Descriptive Statistics, Residuals
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Series: ResidualsSample 1982M03 2011M02Observations 348
Mean -0.001221Median 0.003814Maximum 1.585270Minimum -1.957752Std. Dev. 0.377039Skewness -0.369274Kurtosis 7.870423
Jarque-Bera 351.8638Probability 0.000000
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
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SDDGAS FORECASTLOWER UPPER
Trace and Recolored Forecast of GAS
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GAS GASFGAS_LOWER GAS_UPPER
March 2011 Forecasted Value vs. Actual Value