Citi's Yuen predicts that because increased demand and continued modest production growth, prices will rise another 15 percent at least. Toward the end of the decade, prices will average around $5.50, a level drillers would be more comfortable with.
The industry also has to build the pipelines to get the gas from the new places it is being produced, such as Western Pennsylvania, to its new customers. Pipeline constraints and other infrastructure problems helped create some of the supply problems this winter that sent prices gyrating so violently one Wall Street analyst called them "untradeable."
Between January 1 and mid-February, prices for immediate delivery at the natural gas hub that serves Boston averaged $22.53 per thousand cubic feet, about 4 times higher than the national benchmark, and a record high, according to the Energy Department. For a period during some cold snaps, New York and other East Coast markets saw prices spike as high as $120 per 1,000 cubic feet, according to Platts, an energy information provider. That's equivalent to oil at more than $700 per barrel.
Even while prices near cities were soaring over $100, the drillers just a few hours' drive away were selling gas at less than $4 because there was no room on the pipelines.
"It's a question of getting to market," said Greg Ebel, CEO of Spectra Energy, a pipeline company that moves one-fifth of the gas used in the U.S. every day. "How are we going to actually deliver the supply needed, that's a real challenge for us."
The industry is planning several terminals to export natural gas to customers in Asia and Europe, where gas remains much more expensive than in the U.S. The terminals will be built where pipeline constraints are not a problem, but the terminals approved by the Energy Department so far would increase demand by 13 percent.