Natural Gas Prices Not Seeing Short Term Relief
WASHINGTON, Oct, 8 — With natural gas facing an increase in demand and unpredictable prices, and with winter approaching, the congressional Joint Economic Committee held a hearing this week to learn from energy experts how to stabilize the market.
“It is important that we address the problem of high natural gas prices as soon as possible,” said committee chairman Sen. Robert Bennett (R-Utah). “The high prices act like a brake on the American economy impacting every business and household in America.”
Since 1986, natural gas consumption has increased by 40 percent, a rate far higher than oil or coal, according to the Energy Information Administration. The price of natural gas also has risen sharply in recent years.
“A few years after prices were deregulated in the 1980s, the Congress passed laws that in effect encouraged its use to produce electricity, sharply increasing demand,” Bennett said. Around the same time, production from wells began experiencing a decline in production and environmental restrictions made drilling new wells difficult. Bennett noted these historic changes have resulted in increased natural gas prices and then turned to the energy experts for answers.
According to Logan Magruder of the Independent Petroleum Association of Mountain States, gas consumers are paying excessive prices because of obstacles limiting the development of gas reserves in federally owned land, which he said is plentiful in the Rocky Mountains. Magruder said 99 percent of the natural gas consumed in the U.S. comes from North America-83 percent from the U.S. and 16 percent from Canada.
Magruder said 25 percent of domestic reserves are in the Rocky Mountains, but the region’s potential is limited by the quality and timely access to public lands and an effective regulatory environment.
Wells in use in the lower 48 states have not produced an increase in production in a decade, when production peaked in 1994, said Daniel Yergin, chairman of Cambridge Energy Research Associates. As a result, he said, the United States has resorted to importing gas from Canada.
To alleviate the decline in supply in the future, Yergin proposes more exploration of new North American sites, especially in Alaska and the Canadian Arctic, combined with importing more liquid natural gas from overseas. Yergin said liquid natural gas provides three percent of supplies today, but by 2020, he projects it could be 25 to 30 percent.
According to Paul Sankey, energy analyst for Deutsche Bank, Exxon Mobil is leading the development of a major program to import liquid natural gas to the United States by 2009. Until then, high prices will continue, Sankey said.
To moderate gas prices in the short term, William Prindle of the American Council for an Energy-Efficient Economy said energy efficiency must be improved. Improved efficiency also will help to stabilize the long-term gas market, according to Prindle.
To achieve this, Prindle recommends the federal government expand programs that provide public benefits for efficient energy use and give tax incentives for manufacturers of energy efficient products.
The Northeast, like the rest of the country, also is affected by high natural gas prices, but prices are further inflated in New England because of its location in relation to major reserves.
The cost of transporting gas from major reserves in the Southwest and Western Canada to New England is higher than it is to other parts of the country, according to Tom Kiley, president of the Northeast Gas Association.
Kiley said New England’s current infrastructure used to transport gas is adequate, but will need to expand in the future to accommodate rising gas demand.
Connecticut’s largest natural gas distribution company, Yankee Gas Company, expects to raise prices approximately 1.5 percent for October, said Mary Ingarra, company spokeswoman. The residential price for natural gas in Connecticut, according to an Energy Information Administration report, was $10.98 per thousand cubic foot in October 2001, $11.94 in October 2002 and $14.07 in October 2003.
Ingarra attributes the higher price of gas this year to high gas prices during summer, when the gas was purchased and moved into storage.
Despite the rising prices, demand has been steadily increasing, and Ingarra said, “We’re constantly expanding and adding customers.”
Yankee Gas Company serves 71 communities and recently added the towns of Prospect and East Lyme, two cities with no prior access to natural gas.
