Cold Weather, Low Supplies Prompt Natural Gas Price Increases
March 3, 2003
As the month of March comes in like a lion, cold weather is combining with reduced supplies of natural gas to send the cost of heating homes and offices soaring. Home heating bills of consumers in the northeast and Midwest parts of the country have been steadily climbing all winter. Natural gas customers in Georgia and other southeastern states can expect to see a sharp rise in what they pay as well.
In Georgia, natural gas marketers adjust the rates they charge their customers every month to reflect fluctuations in the price they must pay for gas as well as other costs of doing business. Due to last month's 61 percent jump in wholesale natural gas prices, Georgians should expect the rate they are charged for natural gas to increase for March.
The price surge expected for March is not limited to Georgia, which has a deregulated natural gas industry, nor is it specific to the natural gas industry. Prices nationwide are climbing, and states in the Northeast and Midwest have been hardest hit because of relentless, record-breaking cold. Many parts of the country have experienced much steeper price increases than Georgia. Not only is natural gas becoming more expensive, but costs for all energy commodities (electricity, crude oil, propane, home heating oil, gasoline) are skyrocketing.
Following is a list of factors that are contributing to the high natural gas prices nationwide:
- "Natural-gas prices soared 39% as cold weather, predictions of more freezes, and reports of low storage levels rattled marketers." -- Wall Street Journal, Feb. 25, 2003. (Last week the composite price of March natural gas on the New York Mercantile Exchange jumped 39 percent.)
- "Between fear of war in the Middle East, an oil strike in Venezuela, and cold weather across the country, energy prices are surging across the board. But no commodity has risen faster than natural gas." -- Business Week, Feb. 28, 2003
- According to the Georgia Public Service Commission, this winter has been 25 percent colder than normal in the Southeast. Demand drives up the price.
- The demand placed upon limited supplies by cold temperatures has been exacerbated by the number of natural gas-consuming power plants that have come on line. "Such plants now account for a quarter of gas consumption, nearly twice their level a decade ago." - Business Week, Feb. 28, 2003.
- Supplies are low, forcing many in the industry to buy in the pricier spot markets to offset expected shortages. "Natural gas inventories fell 13 percent last week and were 3 percent below the five-year average as homeowners kept up against the cold, the Energy Department's Energy Information Administration said Thursday." - USA Today, Feb. 28, 2003. Despite the supply shortages, production is down - "a five percent dip in U.S. natural gas production last year, the largest such decline in 16 years. 'The gas supply picture is just barely keeping up with demand', says Lee Gooch, chairman of the Process Gas Consumers Group, which represents large industrial users." -- Business Week, Feb. 28, 2003
- "Compounding problems this year is that large industrial consumers of natural gas have found it difficult to switch fuels in search of a less expensive alternative. The worker strike in Venezuela and fear of a war with Iraq have kept oil prices high this winter, eliminating a 'safety valve' as large consumers switch to oil when natural gas prices are high," says Larry Goldstein, president of the Petroleum Industry Research Foundation - Wall Street Journal, Feb. 25, 2003.
While there is little that Georgia consumers can do to change the global conditions driving high fuel prices, they can practice energy conservation at home, keeping the thermostat at a steady 68 degrees. Proper insulation of doors, windows, and attics will help save energy as well.
With spring just around the corner, warmer temperatures will give consumers relief from the cold and from high home heating bills.