WAMC New York News
(2000-11-15)
TULSA, OK
(KOSU) -
As a blanket of unseasonably cold weather covered much of the nation Tuesday, the price of natural gas, which is used to heat most American homes, rolled to a record high.Natural gas futures jumped 40 cents to $6 per thousand cubic feet before settling at $5.79, the highest closing price since gas futures began trading on the New York Mercantile Exchange. The average spot price of western Oklahoma gas under monthlong contracts increased 22 cents to a record $5.71 per thousand cubic feet.
Wintry weather stretching from California to the Great Lakes and tight natural gas supplies have combined to boost demand for the home heating fuel. Natural gas prices are up 148 percent from last year.
Meanwhile, U.S. gas supplies are down more than 8 percent compared with storage levels this time last year, according to the American Gas Association.
The rising cost of gas means higher energy bills for consumers because most utilities pass the additional cost on to their customers.
For Oklahoma Natural Gas Co., the state's largest gas utility, the cost of gas has increased 30 percent since September. The added cost will be factored into the gas bills of ONG customers starting this month, said ONG spokesman Don Sherry.
ONG now is paying $5.06 per thousand cubic feet for gas, up from $3.88 in September.
"That is a rate we hope to maintain throughout the bulk of the winter," Sherry said.
Last year, ONG, a subsidiary of Tulsa-based ONEOK Inc., was purchasing gas at a price of $2.88.
The weather is expected to play a larger role in the pricing of gas this winter, Sherry said. Most forecasters are predicting a normal winter for Oklahoma, he said. That means it will be colder than the last four Oklahoma winters. The winter of 1999-2000 was the warmest on record.
"We have not had a normal winter in several years," Sherry said. "Most of the long- range models suggest this may be a more normal winter than in perhaps three years. If that is the case, you would expect additional consumption."
The colder weather, in addition to boosting demand, will likely curb excess gas supplies, said Dennis O'Brien, director of the University of Oklahoma's Institute for Energy Economics and Policy.
"That means you won't have much of a supply cushion," O'Brien said. "Natural gas prices are going to be much more susceptible to the ups and downs of weather."
The wintry weather is expected to linger through November in the Midwest, causing a significant increase in demand, analysts said.
"The Midwest will be getting progressively colder over the next three to five days, dropping 10 to 15 degrees below normal this weekend," Joel Burgio, a meteorologist, told Bloomberg News.
As of Nov. 3, the amount of gas stored in the United States totaled 2.75 trillion cubic feet, down from 3 trillion last year, the American Gas Association reported.
U.S. gas supplies are well below normal because demand for the commodity has outpaced production. The increased demand for natural gas is being driven in part by a strong economy and a proliferation of gas-fired power plants.
Low oil and gas prices in 1998 and 1999 caused a widespread halt in production, which diminished gas storage levels. The effects of that crisis continue to linger, said Randy Foutch, chairman of the Oklahoma Energy Resources Board and president of Tulsa-based Lariat Petroleum Inc.
"When prices fell, companies stopped drilling wells," Foutch said. "It didn't just affect exploration for oil. Exploration for natural gas fell off as well."
Higher gas prices, though, have launched producers back into production. The number of active drilling rigs in the United States has increased 38 percent to 1,067 since last year, according to Houston- based Baker Hughes Corp. Most of those rigs -- 840 of them -- were searching for natural gas.
But the added production will not provide an immediate solution, observers said. Getting new supplies to the market requires several months of planning and investment.
"It's not as simple as saying, `Let's drill a well,' " Foutch said. Earlier this year, ONG officials warned customers that winter heating bills could be 50 percent to 60 percent higher than last year.
Copyright ? 2000, World Publishing Co. All rights reserved.
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