Natural Gas Prices Insert3.pdf

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					What’s Up With Natural Gas Prices?
 Many of our customers                              The wholesale price of                years” it becomes increasingly
 are wondering what has                             natural gas (around $6                difficult for the companies that get
 been happening with                                per thousand cubic feet)              natural gas out of the ground to
 natural gas prices lately —                        is twice as high as it                deliver our customers the energy
 it has been a hot topic in                         was this time last year               they need and want. Companies
 the news and you may                               (around $3).                          that produce natural gas need more
 have heard warnings                                                                      access to fresh natural gas supplies.
 about higher prices in                              Natural gas meets one-
 the next few months.                                fourth of the United                 ECONOMIC IMPACT
 We think prices will                                States’ energy needs, and
 be higher this winter —                             is our country’s fastest-            Q: What is the impact of these
 depending on the                                    growing major energy                 price swings on the U.S. economy?
 weather and other                                   source. In addition to
 factors — and we are                                home-heating, natural                A: Federal Reserve Board
 doing everything we can                             gas is a backbone of                 Chairman Alan Greenspan made
 to line up energy supplies.                         American manufacturing               a strong statement in Congress
 Below are some of the questions         — used to make a wide range of                   on May 21, calling the natural gas
 we are hearing most often:              things, such as fertilizer, aspirin,             supply crunch “a very serious
                                         automobiles, steel, plastics, processed          problem.” It’s tough to rebuild the
 Q: Last summer, wholesale               food and even electric power.                    U.S. economy when some
 natural gas prices were at $3.00        Thus, natural gas helps to fuel                  manufacturers are paying nearly
 per thousand cubic feet. In June        economic growth.                                 three times as much for natural gas
 2003 they were twice that.                                                                        as they did just a few years
 What’s happening?                       There are ample                                                 ago. A number of
                                         quantities of                                                       manufacturers
 A: Natural gas is increasingly          untouched natural                                                     have slowed
                                                                                              24%                production, laid
 popular for use in homes, businesses,   gas resources in
                                                                                          natural gas             off workers
 factories and electric power            the United States            39%
                                                                      oil                                         and even gone
 generation because it is efficient,     and Canada.
 clean, and reliable. However, natural   However, as                                                               out of business
 gas production has not kept pace        actively-drilled                                                         because of
 with rising demand, and the market      natural gas wells                                                       natural gas
 price of natural gas reflects this.     reach their “golden                  8%                                prices.
                                                                                                 solar, wind
                                                                      3%                          and other
                                                                  hydroelectric       3.3%       renewables
                                                                                   wood waste
                                                                                   and alcohol
It’s a pocketbook issue for millions                  economic activity have an
of families, too.When some families                   almost immediate impact on the
paid $100 more to heat their homes                    wholesale price of natural gas.
last winter, it meant they had $100                   More supply = lower prices.
less to spend on other things.
                                                      SHORT-TERM OPTIONS
                                                      Q: What can be done to
Q: Some news reports say there is a                   alleviate the price crunch
natural gas “shortage.” Is this true?                 this year?

A: No.This is a poor use of words.                    A: Unfortunately, options are pretty
The word “shortage” makes you                         limited for the next few years.
think you’re running out of                           Efforts that can be taken in the
something, when in fact North                         short-term include:
America holds abundant supplies
of natural gas.What we are                            Increase supply — Even with
experiencing now is a period of                       dramatic production efforts, it          2001          22 trillion cubic feet
tight supplies. Homes and businesses                  typically takes 6-18 months before                     (total U.S. natural gas consumption)

will continue to receive the natural                  there is a sustained supply response
                                                                                               2020          33 trillion cubic feet
gas they want and expect — but                        to higher prices. A fraction of the                    (projected U.S. natural gas consumption)
it may cost them more than it did                     natural gas we use is imported from
last year.                                            other countries in a condensed
                                                      liquid state; efforts can be made to     AS U.S. NATURAL GAS
                                                      increase these liquefied natural gas     DEMAND GROWS,
                                                      (LNG) imports.
Q: How do you bring natural gas                                                                SOURCES OF SUPPLY
prices down?                                          Decrease demand — Another                MUST EXPAND
                                                      way to alleviate the supply crunch is    Source: Meeting the Gas Supply Challenge for the Next 20
A: There is a short answer:                           for factories and other customers        Years — Lower-48 and Canada, and Non-Traditional Sources,
                                                                                               studies conducted for the U.S. Department of Energy by the
INCREASE SUPPLY. It’s in                              that use large amounts of natural gas    American Gas Foundation (2002)
consumers’ best interest to do so.                    to slow down production lines or
                                                      move their operations overseas.
During the 1990s, consumers                           However, this obviously has a harsh
enjoyed natural gas at affordable                     impact on American workers, local        can help, too. For example, during
prices because                                                             economies and       hot weather, consumers can cut
available supplies                                                         corporate           back their use of electricity in order
of natural gas                                                             earnings.           to ease the amount of natural gas
were greater                                                                                   needed to generate electricity.
than demand.                                                                Energy             Before the winter, consumers can
Supply and                                                                  conservation —     improve their home insulation.
demand are now                                                              Encouraging        While efficiency alone can help it
in a very tight                                                             natural gas        isn’t a long-term solution — only
balance, and                                                                customers to       increased supplies will make a
changes in the         99% of the natural gas used in this country comes    use energy         major difference as demand for
                       from North America, which gives American consumers
weather or             the energy control and self-sufficiency they want.   more efficiently   natural gas continues to grow.

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