Residential Services | Gas | Water | Home | Contact Us |
 |
 |
|
6.9.03 Is the natural gas about to become a crisis? Wall Street and Washington expend megawatts of energy trying to decipher the delphic pronouncements of Alan Greenspan. But the Fed chairman didn't need much interpretation on May 21 when he warned Congress about spiraling natural gas prices. "I'm quite surprised at how little attention the natural gas problem has been getting," he said, "because it is a very serious problem." That's a position he is expected to reiterate when he appears before the House Energy & Commerce Committee on June 10. In fact, the natural gas crunch is so serious that it might complicate President Bush's 2004 reelection. The economic pinch from higher prices could become a big issue in early contests in Midwestern swing states heavily dependent on gas heating, including Iowa and Michigan. Democrats will no doubt blame the spike on the Administration and its energy industry allies. Bush also could be forced onto the defensive in pivotal states such as Illinois, Ohio, Pennsylvania, and Wisconsin. In a sign the Administration is worried, Energy Secretary Spencer Abraham is holding an emergency natural gas summit in late June to discuss short-term solutions. "A hot summer could increase demand for natural gas and exacerbate the problem," Abraham says. "The challenge requires us to act today." Trouble is, there's only so much the White House can do by winter. While inventories rose in the week ending May 23, to 1,085 billion cubic feet, they're still well below the five-year average of 1,593 bcf -- and nowhere near the comfort zone of 3,000 bcf. "It doesn't look like we're going to catch up," says Thomas E. Capps, CEO of utility Dominion Resources (D ) Inc. Economists attribute the doubling of prices over the past year to stepped-up demand caused by a cold winter and shrinking imports, diminishing production from old wells, and low output from new fields. The industry also blames Wall Street for insisting on higher profits today at the expense of future production. Whatever the causes, with natural gas accounting for 22% of energy consumption, manufacturers and consumers are being squeezed. The Federal Energy Information Administration expects that consumers -- having weathered a 30% boost in bills last winter -- will be forced to ante up at least 6% more this coming home-heating season. That would make it the second-most-expensive winter in recent decades. Industry titans such as Dow Chemical (DOW ) and International Paper (IP ) report higher prices are pinching profits. One small manufacturer, Mississippi Chemical, even blamed gas prices for its recent bankruptcy. "We're facing an extremely difficult challenge," says Andrew D. Weissman, chairman of Energy Ventures Group, a Washington investment firm. "Major industries may have to shut down this winter." Chemical and fertilizer companies are particularly vulnerable, since they use natural gas to make their products. On Capitol Hill, lawmakers are struggling to respond to an energy crunch -- but the wrong one. The energy bill now in Congress addresses the 2000-01 California crisis by strengthening the Federal Energy Regulatory Commission's ability to prevent Enron-type scandals. Meanwhile, the natural gas industry -- which has warned of shortages for years -- has run into resistance from lawmakers who don't want energy exploration in their constituents' backyards. Any relief under consideration seems destined to be long-term. The energy bill includes some royalty reductions for producers, $20 billion to build a natural gas pipeline from Alaska to the Lower 48, and a measure reducing to under a year the time it takes to win drilling permits. But there won't be any impact on supply for several years. That will be too late to help a President vying for another term. Alarm as US gas supplies hit low Natural gas supplies in the U.S. have reached critically low levels in recent months and may be inadequate to meet demand during a hot summer this year. Spencer Abraham, the U.S. energy secretary, has called an emergency meeting of the National Petroleum Council this month amid calls for the administration to deal urgently with the shortage. Mr Abraham said the U.S. had 696bn cu. ft. of gas in storage at the end of March, the lowest since 1976 when record-keeping began. By the week of April 11, levels had dropped to 623bn cu. ft. "Storage has increased since that time, but it is still only half the level of a year ago, and 42 per cent below the previous five-year average," Mr Abraham said. Tomorrow Federal Reserve chairman Alan Greenspan is to testify before the House energy and commerce committee on threats to the economy from the shortage. Prices are reported to have increased as much as 700 per cent over the past three years, provoking industries from steel to petrochemicals to call on the government to address what they call "the other energy crisis" because it is less well known than the domestic oil shortage. "No company, no industry, no consumer can absorb a threefold increase in major raw material prices and continue to compete in the global marketplace," said Greg Lebedev, president of the American Chemistry Council, the largest industrial users of natural gas. The problem arose after the U.S. government encouraged natural gas as an environmentally friendly fuel but refused to open what Mr Abraham said were about 40 per cent of the potential gas resources on federal lands. |
We have gas in storage to use for the coming winter. |
