Road Apples
07-12-2003, 11:10 PM
No plans to rein in gas prices
Greenspan says help not feasible
By DAVID IVANOVICH
Copyright 2003 Houston Chronicle
Washington Bureau
WASHINGTON -- Federal Reserve Chairman Alan Greenspan warned lawmakers Thursday that the federal government can do little in the short term to rein in natural gas prices.
"Iīm not aware of any short-term expedients that can be employed at this stage to significantly alter the path that will occur in prices over the next six to nine months or a year," Greenspan told members of the Senate Energy Committee.
Instead, the nation will be subject to the vagaries of the weather. An especially hot summer or bitterly cold winter could send prices soaring even higher.
For the moment, the threat seems to have receded. A surge of gas flowing into storage reported Thursday drove down the benchmark price of natural gas by 5 percent in trading on the New York Mercantile Exchange.
Called to Capitol Hill for a second time to discuss the economic fallout from high gas prices, the nationīs central banker said the damage to-date has been minimal.
Just how serious the economic impact of the higher gas prices will be remains unclear.
Greenspan took some issue with estimates by Stephen Brown, an economist with the Federal Reserve Bankīs Dallas branch. Brown had calculated that if gas prices remain at high levels, the nationīs gross domestic product could fall 0.6 percent to 2.1 percent short of where it otherwise would have been.
Greenspan said he was a "little surprised" by the size of those numbers, noting that because natural gas is largely a domestic industry, the price rise really represents a transfer of wealth from consumers of gas to producers of gas, "both in the United States."
Brown could not be reached for immediate comment.
But the high prices are making the United States "uncompetitive in a number of industries," Greenspan said, adding that jobs will follow "the inevitable movement of gas-using productive capacity to foreign shores."
Dow Chemical, for instance, like other chemical makers a heavy user of natural gas, has already transferred production from a petrochemical plant in Louisiana to Europe, where gas prices are running about half the levels seen in the United States.
Huntsman, the worldīs largest privately held chemical maker, has seen its gas costs jump $150 million to $200 million annually. To offset that cost "weīd have to fire half the people in our company," Huntsman Chief Executive Officer Peter Huntsman said.
Homeowners also will feel the pinch from the lofty gas prices, because much of the nationīs power generation is fired by natural gas, in the form of higher electric bills this summer as well as heftier gas heating bills in the wintertime.
Houstonīs electric utility, Reliant Energy, has already asked regulators for permission to raise residentsī electricity bills by about 9 percent because of the higher gas prices. CenterPoint Energy, Houstonīs gas utility, will seek a fuel cost adjustment on July 21, an increase that could come on top of a proposed general rate increase averaging $4.65 per household.
With all the talk of higher gas prices, there is some evidence the public at large is beginning to pay close attention to this issue. A recent poll of 800 Americans conducted by the Luntz Research Companies found that 76 percent of those surveyed were at least "somewhat" concerned about the higher gas prices.
For the year, natural gas prices are expected to average about $2 per thousand cubic feet or 68 percent more than last year, Assistant Energy Secretary David Garman told the panel.
On Thursday, gas futures for August delivery dropped 26.2 cents but still closed at a very strong $5.26 per thousand cubic feet. Gas prices fell Thursday after traders learned gas inventories had risen more than analysts had expected. Supplies are now 25 percent less than a year ago at this time.
Greenspan discounted suggestions the high prices are the result of market manipulation, noting, "the levels of natural gas prices we are now finding in our markets can be fully explained by the relative balances of supply and demand."
To help ease the gas crunch in future years, Greenspan has called for an expansion of the nationīs ability to import liquefied natural gas, or LNG, from abroad. Known gas reserves in the former Soviet Union and the Middle East are huge, but LNG accounted for only about 1 percent of the nationīs gas supplies last year.
While some lawmakers have expressed concerns about the nation becoming dependent on foreign sources of natural gas, just as it has with oil, Greenspan argued that importing gas represents "the ultimate safety valve." Rather than be limited to a North American market, increasing these imports would allow the United States to become part of a world market.
Greenspanīs emphasis on LNG imports has frustrated many gas producers and heavy gas users, who have been pushing both the Bush administration and lawmakers to allow for greater access to drill on federal lands. Bruce Thompson, Forest Oil Co.īs executive director for public and industry affairs, argued that LNG imports are no panacea. Analysts say it will take a decade or more before these imports represent even 10 percent of U.S. supplies.
Producers complain that much federal land, particularly in the Rocky Mountain region, is ostensibly open for drilling, but the permitting process is so cumbersome as to make exploration all but impossible. William Whitsitt, president of the Washington-based Domestic Petroleum Council, says regulators have been sitting on about 130 drilling applications going back to the mid-1990s.
Greenspan agreed streamlining the permitting process would probably do more than anything else to bring new gas supplies to the market.
But such proposals will not help the nation limp through the summer or the winter. Democrats on Capitol Hill have called on the administration to launch a major initiative to encourage conservation, similar to Californiaīs efforts to discourage electricity usage during the electricity crisis there two years ago.
Greenspanīs testimony came less than three weeks before the Republican-led Senate is to resume consideration of an energy bill.
On Thursday, the House leadership announced the creation of a new task force to study the gas issue and report back to Speaker Dennis Hastert, R-Ill., by Sept. 30.
http://www.chron.com/cs/CDA/ssistory.mpl/business/1989593
Greenspan says help not feasible
By DAVID IVANOVICH
Copyright 2003 Houston Chronicle
Washington Bureau
WASHINGTON -- Federal Reserve Chairman Alan Greenspan warned lawmakers Thursday that the federal government can do little in the short term to rein in natural gas prices.
"Iīm not aware of any short-term expedients that can be employed at this stage to significantly alter the path that will occur in prices over the next six to nine months or a year," Greenspan told members of the Senate Energy Committee.
Instead, the nation will be subject to the vagaries of the weather. An especially hot summer or bitterly cold winter could send prices soaring even higher.
For the moment, the threat seems to have receded. A surge of gas flowing into storage reported Thursday drove down the benchmark price of natural gas by 5 percent in trading on the New York Mercantile Exchange.
Called to Capitol Hill for a second time to discuss the economic fallout from high gas prices, the nationīs central banker said the damage to-date has been minimal.
Just how serious the economic impact of the higher gas prices will be remains unclear.
Greenspan took some issue with estimates by Stephen Brown, an economist with the Federal Reserve Bankīs Dallas branch. Brown had calculated that if gas prices remain at high levels, the nationīs gross domestic product could fall 0.6 percent to 2.1 percent short of where it otherwise would have been.
Greenspan said he was a "little surprised" by the size of those numbers, noting that because natural gas is largely a domestic industry, the price rise really represents a transfer of wealth from consumers of gas to producers of gas, "both in the United States."
Brown could not be reached for immediate comment.
But the high prices are making the United States "uncompetitive in a number of industries," Greenspan said, adding that jobs will follow "the inevitable movement of gas-using productive capacity to foreign shores."
Dow Chemical, for instance, like other chemical makers a heavy user of natural gas, has already transferred production from a petrochemical plant in Louisiana to Europe, where gas prices are running about half the levels seen in the United States.
Huntsman, the worldīs largest privately held chemical maker, has seen its gas costs jump $150 million to $200 million annually. To offset that cost "weīd have to fire half the people in our company," Huntsman Chief Executive Officer Peter Huntsman said.
Homeowners also will feel the pinch from the lofty gas prices, because much of the nationīs power generation is fired by natural gas, in the form of higher electric bills this summer as well as heftier gas heating bills in the wintertime.
Houstonīs electric utility, Reliant Energy, has already asked regulators for permission to raise residentsī electricity bills by about 9 percent because of the higher gas prices. CenterPoint Energy, Houstonīs gas utility, will seek a fuel cost adjustment on July 21, an increase that could come on top of a proposed general rate increase averaging $4.65 per household.
With all the talk of higher gas prices, there is some evidence the public at large is beginning to pay close attention to this issue. A recent poll of 800 Americans conducted by the Luntz Research Companies found that 76 percent of those surveyed were at least "somewhat" concerned about the higher gas prices.
For the year, natural gas prices are expected to average about $2 per thousand cubic feet or 68 percent more than last year, Assistant Energy Secretary David Garman told the panel.
On Thursday, gas futures for August delivery dropped 26.2 cents but still closed at a very strong $5.26 per thousand cubic feet. Gas prices fell Thursday after traders learned gas inventories had risen more than analysts had expected. Supplies are now 25 percent less than a year ago at this time.
Greenspan discounted suggestions the high prices are the result of market manipulation, noting, "the levels of natural gas prices we are now finding in our markets can be fully explained by the relative balances of supply and demand."
To help ease the gas crunch in future years, Greenspan has called for an expansion of the nationīs ability to import liquefied natural gas, or LNG, from abroad. Known gas reserves in the former Soviet Union and the Middle East are huge, but LNG accounted for only about 1 percent of the nationīs gas supplies last year.
While some lawmakers have expressed concerns about the nation becoming dependent on foreign sources of natural gas, just as it has with oil, Greenspan argued that importing gas represents "the ultimate safety valve." Rather than be limited to a North American market, increasing these imports would allow the United States to become part of a world market.
Greenspanīs emphasis on LNG imports has frustrated many gas producers and heavy gas users, who have been pushing both the Bush administration and lawmakers to allow for greater access to drill on federal lands. Bruce Thompson, Forest Oil Co.īs executive director for public and industry affairs, argued that LNG imports are no panacea. Analysts say it will take a decade or more before these imports represent even 10 percent of U.S. supplies.
Producers complain that much federal land, particularly in the Rocky Mountain region, is ostensibly open for drilling, but the permitting process is so cumbersome as to make exploration all but impossible. William Whitsitt, president of the Washington-based Domestic Petroleum Council, says regulators have been sitting on about 130 drilling applications going back to the mid-1990s.
Greenspan agreed streamlining the permitting process would probably do more than anything else to bring new gas supplies to the market.
But such proposals will not help the nation limp through the summer or the winter. Democrats on Capitol Hill have called on the administration to launch a major initiative to encourage conservation, similar to Californiaīs efforts to discourage electricity usage during the electricity crisis there two years ago.
Greenspanīs testimony came less than three weeks before the Republican-led Senate is to resume consideration of an energy bill.
On Thursday, the House leadership announced the creation of a new task force to study the gas issue and report back to Speaker Dennis Hastert, R-Ill., by Sept. 30.
http://www.chron.com/cs/CDA/ssistory.mpl/business/1989593