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Energy

Natural Gas Prices to Soar throughout Winter Months after Gulf Coast Hurricanes

Consumers are expected to pay much more for energy because of supply disruptions

by Glenn Hess
October 13, 2005

The government is predicting significantly higher costs this winter for homes and businesses that use natural gas because of the sharp reduction in energy production in the Gulf of Mexico caused by the recent hurricanes.

In its latest short-term outlook, the Energy Information Administration (EIA) forecasts that the price of natural gas will be 29-44% higher than last winter. “The impact of the hurricanes on oil and natural gas production, oil refining, natural gas processing, and pipeline systems have further strained already-tight natural gas and petroleum product markets on the eve of the 2005–06 heating season,” which runs from October through March, EIA said on Oct. 12.

The chemical industry is the nation’s largest industrial consumer of natural gas, using it both for heating and as a raw material. The clean-burning fuel is also used to heat 55% of American homes.

The American Chemistry Council says the report “reinforces growing concern about U.S. natural gas prices and underscores the need for immediate remedies by Congress and the Administration.” Natural gas is currently priced at about $14 per million Btu—compared with $2.00 six years ago—and EIA expects prices will remain at double-digit levels for months to come.

“For manufacturing industries that rely on natural gas and compete in a global market, this is not sustainable,” ACC says. “If prices stay at projected levels, it is likely to cause ‘demand destruction’ as industrial users are priced out of the U.S. market. What this means is that manufacturing industries will have involuntarily curtailed output due to high production costs, putting the future of their U.S. operations—and American jobs—at risk.”

According to EIA, total U.S. demand for natural gas this year is expected to be down 1.4% from 2004, driven in large part by industrial users who cut back on usage by 8% because of the high prices.

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