In addition to COVID-19, the mild temperatures observed in March also contributed to these revised forecasts in demand, in particular with regard to that in the residential sector. However, a significant portion of the revised forecasts in demand for the industrial, commercial and electricity production sectors is due to the effects of the pandemic.
- In the industrial sector, the decline in demand that can be attributed to the decline in economic activity could reach 2 Bcf/day, roughly equivalent to the expected increase in demand for liquefaction terminals in 2020.
- We can also expect to see a reduction in demand for natural gas and electricity in the commercial sector, which is also affected by the lockdown. Similar to the residential sector, a portion of the demand for natural gas in the commercial sector is also affected by temperature fluctuations that directly determine heating and air conditioning requirements. In contrast, demand in the commercial sector has been hard hit by the lockdown and closure of non-essential businesses.
In sum, if the economic disruptions are limited to the second quarter of 2020, it is estimated that the pandemic could lead to a reduction of 2.0 to 2.5 Bcf/d in total natural gas demand in the United States for the whole of 2020.
Lastly, it is important to note that global economic turbulence also affects exchange rates. Between Canada, commodity-exporting countries and the United States—where the currency is perceived as a safe haven—the current pandemic is causing the U.S. dollar to appreciate against a number of currencies, including the Canadian dollar. This, of course, increases the cost of a commodity when its price is converted into Canadian dollars.