Balancing Items in EIA’s Natural Gas Data Series

In an ideal statistical world, measured supply of natural gas would equal measured disposition (consumption). In a large and diverse national system of supply and disposition, however, the supply and disposition of natural gas cannot be tracked and measured exactly. When physical and statistical measurements of natural gas supply and disposition activities do not match, the difference is called the balancing item. The term is calculated as the difference, for a report period, between the sum of the components of supply and the sum of the components of natural gas disposition. The formula for the United States is:

(Dry gas production + Supplemental gaseous fuel supply + Net imports + Net storage withdrawals + Balancing item) = (Lease and plant fuel consumption + Pipeline fuel consumption + Residential, commercial, industrial, and electric utility consumption).

The balancing item may be positive or negative, because the sum of supply measures may be larger than the sum of disposition measures, or vice versa (see figure). The signs may change from month to month and year to year.

The difference between measured supply and disposition may be due to unmeasured sources of supply or disposition or to data reporting problems for any of the measured sources. The balancing item for any given year is customarily revised to a smaller value when final annual data replace the monthly data. One reason for this change is that several pieces of the supply and disposition system are only reported annually and are estimated for the more recent monthly periods. Another reason is that monthly consumption data series for end-use sectors are calculated from a sample of companies making end-use deliveries and include sampling uncertainty, whereas annual data are collected from all known respondents. Other reasons are that more time usually is available for the resolution of data quality and nonresponse issues for the annual series.

The annual balancing item has never been zero. The absolute values of annual balancing items since 1977 have ranged from 41 billion cubic feet (1977) to 897 billion cubic feet (1999). In most years the annual value has been negative, indicating that reported supply exceeded reported consumption. Within a given year, monthly balancing item measures are often positive in the early months but negative in the later months of the year. This pattern may relate to a lag in delivery reports during the peak winter heating season.

The balancing item measures for 2000 and the first three quarters of 2001 have been large and, in addition, have had opposite signs. Most analysts of natural gas industry trends in 2000 have assumed that consumption activity was underreported in 2000. For 2001, analysts have hypothesized that consumption estimates are too large and that production volumes are underreported. For the year 2000 and the first three quarters of 2001, the absolute values of the balancing items averaged 3.7 percent and 2.6 percent of total consumption, respectively. Those levels are significant when analysts seek to understand active, volatile markets.