Coming in the mail: big energy bills
This winter the average cost for natural gas could rise 52 percent, even though storage supplies aren't running low.
Turn the thermostat down 2 degrees this winter.
That's not former President Jimmy Carter speaking but the natural-gas industry. Although officials expect to have adequate supplies of gas through the winter, they caution that Americans will pay substantially more for it. Prices are expected to hit somewhere between $8 and $11 per thousand cubic feet, up from $6 to $7 last year.
For the average consumer who uses gas to heat, that could mean a winter heating bill of $1,129 - or 52 percent higher than last year, according to estimates by the Energy Information Administration (EIA). On the spot market, natural-gas prices are hitting historic highs.
"We think it's going to be a pretty tight market," says Dave Costello, an energy analyst at EIA in Washington. "A lot depends on how fast production gets back on line."
The natural-gas industry is still unsure about how much hurricane damage its platforms, processing facilities, and pipelines sustained in the Gulf of Mexico. As of Friday, the US Minerals Management Service reported 79.4 percent of the gas produced in the Gulf of Mexico was not flowing. The region supplies as much as 25 percent of US natural gas. Even so, the industry is trying to assure the public that natural gas will be available throughout the winter.
"We're confident of reliable supplies for the American consumer," says R. Skip Horvath, president of the Natural Gas Supply Association in Washington. "But we are urging natural-gas users to turn down the thermostat 2 degrees over the course of the winter to help offset the effects of hurricane Katrina."
One reason the industry is relatively confident is that storage levels coming into the fall are 2.4 percent higher than the five-year average (although lower than last year). The increase in underground storage is also related to the hurricanes: Some of the major industrial users of gas, such as refineries and chemical plants, were damaged and are not using gas.
For example, 17 percent of ethylene oxide production, used for such things as antifreeze, adhesives, and insulation, is off-line because of the hurricanes, according to one analyst, Jay Saunders of Deutsche Bank.
In addition, September is a month of low consumer demand. In the West, for example, the month has been warmer than normal. However, early forecasts are for a winter that is about 10 percent colder than last year, which was warmer than normal. One forecast group, AccuWeather, is predicting a harsh winter in the Northeast, with average temperatures 2 to 3 degrees below normal.
"We're not using that number," says Mr. Costello of EIA, "but it's a fairly significant number in terms of heating load."
Keeping households and business supplied this winter will require an increase of imports from Canada (up 8 percent) and a rise in liquefied natural-gas deliveries (up 26 percent). US supplies are expected to remain flat, assuming that the Gulf Coast production comes back onstream within the next month.
So far, the cumulative gas not flowing represents 5.3 percent of the region's annual production.
"It takes a couple of weeks for a normal set of repairs," says Mr. Horvath, who adds that some areas may take longer because the sea may have reclaimed areas that were once used for gas processing. "We expect storage levels to be full once winter sets in."