- The Washington Times - Thursday, October 6, 2005

Many U.S. households will face a near doubling of home heating costs this winter because of severe disruptions in Gulf of Mexico supplies of natural gas and home heating oil, energy analysts say.

Guy Caruso, head of the Energy Information Administration, yesterday said his agency next week will raise its forecast of heating costs rising from 34 percent to 71 percent over last year, taking into account extensive damage to Gulf-area facilities caused by Hurricane Rita.

Based on damage from Hurricane Katrina alone, combined with forecasts for a colder-than-normal winter in the eastern U.S., AccuWeather.com already was predicting increased costs of 50 percent to 70 percent.

But analysts say those estimates will rise sharply because Rita, which hit areas of the western Gulf left untouched by Katrina, essentially doubled the damage to irreplaceable natural gas facilities and refineries from the earlier storm.

Energy Secretary Samuel W. Bodman also warned yesterday of “problems” for natural gas customers — which includes much of the Washington area.

“I’m confident that we’re going to have enough gas to heat people’s homes, but it’s going to be expensive,” he told reporters at an energy conference. He and President Bush have been urging consumers to conserve fuel this winter to minimize the pain from high heating bills.

Natural gas customers in the Mid-Atlantic and Midwest, where about 90 percent ofhomes are heated by gas, are the most vulnerable and will see the biggest price increases because there are little or no substitutes for gas piped in from the Gulf.

Natural gas prices have more than doubled since last winter to nearly $14 per million British thermal units in trading on the New York Mercantile Exchange. By comparison, oil prices are roughly where they were before the storms, and gasoline prices are up about 50 percent over last year.

The difference is that there are few ways to make up the shortfall in Gulf production caused by the storms, which as of yesterday remained at about 66 percent and had been as high as 80 percent.

Each day that facilities remain closed adds to the 7 percent of annual gas supplies already cut off by the storms at a time of year when utilities usually are building up stores for the winter.

“The combination of the increased price and lower-than-normal temperatures will result in a one-two punch on household budgets in the northeastern quarter of the nation,” said AccuWeather meteorologist Ken Reeves.

While the U.S. is able to import half or more of the oil and gasoline it uses from abroad, imports of natural gas, which must be liquefied at super-low temperatures in a complex and expensive process, provide 1 percent of U.S. supplies.

Analysts say imports cannot be increased significantly to fill the gap, in part because only four U.S. port facilities are equipped to handle them.

Two of the import terminals, serving customers primarily in the Midwest, are in the Gulf and were shut down by the storms. Yesterday, those terminals in New Orleans and Lake Charles, La., were cleared for the first time to start receiving shipments again.

A third terminal at Cove Point, Md., which feeds supplies to Washington Gas, remains open and may help to alleviate the worst price increases for Washington-area customers. That terminal received its first shipment of liquefied gas this summer from Russia, which has the world’s largest gas reserves.

Also helping to alleviate the shortages is the higher-than-normal inventories of gas held by utilities before the hurricanes, making it possible for some to still reach their goals for winter storage by the traditional November 1 start of the heating season, if supplies are restored quickly, according to the American Gas Association.

But the industry group nevertheless has been urging the Bush administration and Congress to provide funding for low-income households that face punishing heating bills this winter.

Heating oil customers also face steep price increases because of the shutdown of up to a quarter of the nation’s refineries at the height of impact after the storms. At this time of year, refineries usually are busy preparing supplies of heating oil for the winter.

As of yesterday, 13 refineries that produce 750,000 barrels a day of distillate fuels remained closed, according to the energy agency.

Heating oil customers might get some relief if the White House opts to release supplies from the strategic reserves, and they could get additional supplies of distillate from Europe, where refineries have been operating at full tilt to help fill in the fuel gap left by the storms.

Mr. Caruso said a price trigger that would allow the administration to tap the Northeast Heating Oil Reserve could be met next week. That trigger is based on the difference in the price of heating oil and crude oil. But he said heating oil from Europe may be harder to come by because the Continent does not have much in store.

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