Natural gas fuel prices hit high Increasingly important fuel is increasingly expensive By Miguel Llanos MSNBC Sept. 7  The price of the nations stealth fuel  natural gas  hit an all-time high this week and that could mean even higher than feared heating costs this fall and winter. Natural gas prices are now double normal seasonal levels, and much of that will be passed on to consumers. Coupled with crude oil stockpiles at their lowest levels since 1976, the news has some energy analysts bracing for a crisis.

NATURAL GAS hasnt had the high profile that crude oil, heating oil or even coal has had in the public mind. But some 53 million residential users, 40,000 factories and 500 utilities nationwide depend on the fuel.

We really have the makings of an energy crisis here for this winter, said John Kilduff, senior vice president of risk management for commodities broker Fimat USA Inc., citing bad news for natural gas, oil and heating oil. A grim supply scenario sent the price for October delivery of natural gas as high as $5.08 per 1,000 cubic feet Wednesday before settling at $5.071.

Analysts expected a short-term drop due to profit taking, but this weeks record reflects both the volatility and the increasing importance of natural gas in the U.S. economy and in U.S. homes. DEMAND, SUPPLY ISSUES Factories comprise 40 percent of U.S. natural gas usage, the American Gas Association estimates. With the hot economy, however, natural gas use has risen dramatically. Homes, too, increasingly rely on natural gas. More than 70 percent of new homes use it as a heating source  a 16 percent increase from a decade earlier.

Power plants increasingly use natural gas instead of coal because it is cleaner for the environment. Its estimated that 95 percent of new power plants between now and 2003 will have natural gas-fired engines. Compounding the problem, mild winters in recent years created natural gas surpluses, which slowed investment in new production. Drilling should increase as demand rises, but theres a 12- to 18-month lag between increased drilling and increased production. The American Gas Association says that 99 percent of U.S. natural gas supplies comes from the United States and Canada  unlike oil, where imports account for half of U.S. needs. But U.S. stocks are down 7 percent from a five-year average, the Energy Department said in data released Thursday. OFFICIALS WANT EARLY WARNING Some areas have already seen a jump in consumer prices. In Seattle, for example, regulators last month approved a 27 percent increase in the average household bill. Those customers will pay on average $13 more a month as a result. Fearing a backlash when consumers see their heating bills jump, elected officials in recent weeks have been planning for the worst and warning constituents of the same.

The White House and Congress have created a heating oil reserve, governors from the nations oil-producing states will hold a summit later this month to highlight the shortages and states where utility deregulation has started are telling consumers they can now shop around for lower natural gas prices as well as alternative energy choices. But, as Gas Daily, an industry newsletter, noted in a special report about the winter preparations, the warnings wont do anything to lower prices. Indeed, it quotes a leading analyst as saying supplies could be tight and prices high through the winter of 2001. Even with a normal winter, Edward Kelly of Cambridge Research Energy Associates said, its quite possible we will see the lowest storage inventory ever by the end of March. The Associated Press contributed to this report.

http://www.msnbc.com/news/456588.asp

-- Martin Thompson (mthom1927@aol.com), September 07, 2000

Answers

And, the beat goes on.

-- Uncle Fred (dogboy45@bigfoot.com), September 07, 2000.

I keep hearing the dumb remark, "Oh, we'll just switch to propane". . .or, "We'll just switch to heating oil." Such naive comments really frost me. Evidently a huge number of people have no idea or vision of what's happening. Propane inventories are far worse than natural gas--down some 40% from last year. And, heating oil is just about as bad, down 38%.

It would make much more sense to say, "Oh, we'll just switch to fireplace wood, build a wind mill, or build a dam."

With "intelligence" like that out there, who needs a politician to muck up the problem further?

-- JackW (jpayne@webtv.net), September 07, 2000.

Day by day now just think of the picture that is being painted here. Some 40,000 factories and 500 utilities absolutely depend on natural gas for normal functioning. Think of the carnage that can be created when they all start shutting down in close proximity to each other.

Like it or not, the boys is Wasington will have to act, with some sort of rationing, to prevent panic.

-- Wellesley (wellesley@freeport.net), September 07, 2000.

Looks like we are in stage 3 from the 5 stages by Goldman in a previous post.

-- Martin Thompson (mthom1927@aol.com), September 07, 2000.

A friend, who works for a California utility tells me that his company is really sweating it out now. With their having been taxed up to 98% of capacity during the July and August 100 degree hot spells, he says that, with only 85% of capacity available now, if another 3 to 5 days of 100 degree plus weather shows up in September, they will be in a lot of troube supplying power.

This is unlikely, but not impossible. He says there are occasional Septembers that have turned unseasonally hot.

-- Wayward (wayward@webtv.net), September 07, 2000.

Woops, sorry, I meant to deliver the above post under the Calfornia To Shut Power Plants For Routine Maintenace thread.

-- Wayward (wayward@webtv.net), September 07, 2000.

The figure that jumped out at me was 95% of all new power plants under construction will be powered by natural gas.

Isn't this kinda asking for trouble?

-- QMan (qman@c-zone.net), September 07, 2000.