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.
3% and other
hydroelectric 3.3% renewables
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.
ARE THERE SHORTAGES?
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,
THE MAIN SOLUTION
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.