Piping Heat
Taken together, November and December 2000, were the coldest months on record in the US. For Americans who rely on natural gas, their heating bills are now bringing an added chill.
The price shock has been made worse by the fact that the last three winters were mild. But more than weather accounts for the spike in gas prices. Supply and demand are out of whack. The time to fix it is now.
Until recently, gas producers were allowed to charge only relatively low prices. That didn't provide much incentive to increase supplies. In fact, gas production went up just 1 percent over the past five years (1995-2000); over that period, demand grew by 5 percent. So prices jumped dramatically, boosting gas bills 50 percent and higher for many consumers.
But this market failure needs some perspective. North America still has plenty of natural gas underground, and inventories above ground always exceed the gas used. The nation's total energy situation is better than in the 1970s because of better conservation and more efficient use of fuels.
And gas exploration has gone up over the past year. About 800 drilling rigs are operating now, up from a low point in April 1999, when the number was just under 400. That activity is expected to increase gas production 5 percent. The change hasn't affected prices - yet - because of a six- to 18-month lag between drilling and getting gas to market.
US consumption, which is now 21 trillion cubic feet per year, may increase 50 percent over the next two decades, according to one official forecast, driven mostly by increased demand for clean fuel in the expanding electric power industry.
Many of the gas woes will be addressed in legislation to be introduced in Congress next week by Sen. Frank Murkowski (R) of Alaska. The bill calls for increasing domestic production of oil and gas. And more gas pipelines will bring the supply and demand back into equilibrium. That should be a focus of the Bush administration's energy policy as it works on the issue.
The reality is that power producers will use the cheapest power available, a point the Bush policy must consider. Ninety percent of all new future electric power generation will likely come from gas-fired plants. They can be built at different scales than coal; they're more advanced, cheaper, and efficient.
Increasing the use of coal or nuclear power would present troubling environmental concerns. Alternative energy sources, such as wind and solar, should continue to develop, but are not yet economically viable.
The solution to this "crisis" is to have an environmentally sound and a rightly sized pipeline system that brings gas in to the continental US from Alberta, Nova Scotia, the Mexican gulf, and Alaska. That will help put supply and demand back in line.
The Bush administration is working with Canada and Mexico to get these pipelines in place quickly. Gas companies, and Congress, should help clear the way.
(c) Copyright 2001. The Christian Science Publishing Society
