- The Washington Times - Thursday, December 7, 2000

American households will pay an average of 54 percent more this winter over last year to heat their homes as fuel shortages have combined with an Arctic cold snap to drive natural gas prices to record highs.
The Energy Information Administration raised its estimate yesterday of the average heating bill for the 70 percent of Americans who heat their homes with natural gas to a record $834.
That is up from an October forecast of $780 and 54 percent higher than the average $540 spent during the last heating season from October to March.
Cold weather and chronic oil shortages will drive the cost of heating a home with oil this winter to a record $1,044, up 38 percent from last year, despite efforts by the Clinton administration to dampen heating oil prices with a release from the Strategic Petroleum Reserve (SPR), the agency said.
"Extraordinarily low heating oil inventories continue to put East Coast markets at risk of sharp price spikes if more cold weather moves in," the agency said, "despite high production rates and an infusion of SPR oil."
The energy crunch won't end when winter is over, the agency added. Gasoline prices at the pump are poised to rise again in the spring and summer from current levels of around $1.50 a gallon because supplies from refineries remain tight, it said.
"Gasoline prices will decline only slightly, if at all, this winter, then rise modestly when next year's driving season begins in the spring," the agency said in its updated energy outlook.
Tight gasoline supplies will keep pressure on prices this spring, and create "the probability of price runups next summer," it said.
Federal Reserve Chairman Alan Greenspan on Tuesday cited this year's persistently high energy prices as one of the "untoward events" that poses a threat of derailing the long-running economic expansion.
"The sharp rise in energy prices, if sustained, is worrisome," he said. "As we learned from previous episodes, rising energy prices could engender risks to both inflation and economic activity."
Mr. Greenspan said the jump in the cost of imported oil has acted like a tax on consumers and businesses, deducting about 1 percent of their income.
Energy costs for businesses are soaring like they are for consumers, and are up by 40 percent since the spring of 1999, Mr. Greenspan said. But for the most part, he said, the high energy costs have been borne by businesses rather than passed along to consumers, resulting in lower earnings and the declines in the stock market.
The unexpected surge in market prices for oil and gas this year have forced the Energy Information Agency to repeatedly raise its estimates of consumer energy costs.
Forecasts of a bitter Arctic cold snap descending on most of the nation sent prices for natural gas soaring by more than 40 percent this week on the New York Mercantile Exchange. The price of home heating oil has risen in tandem.
Besides cold weather, the high prices are the result of a combination of burgeoning demand, dwindling supplies, stricter environmental regulations and other factors.
The Organization of the Petroleum Exporting Countries has kept a tight rein on oil supplies all year. The energy agency said it does not expect the international oil cartel to honor its promise to increase production and reduce prices from levels around $30 a barrel today.
"A significant probability exists that prices will average close to $30 per barrel during the first half of 2001," keeping pressure on prices at the pump for American motorists during the next driving season, it said.
Most natural gas is produced in the United States and Canada. The unexpected surge in natural gas prices this year has been the result of short supplies and increased demand for natural gas from utilities, which are substituting the clean-burning fuel for coal and oil to comply with stringent environmental regulations.
Natural gas traditionally has been used mostly by consumers to heat their homes and cook. But increased competition from power plants for scarce gas supplies should keep prices high, even with new production of gas scheduled to come on line next year, the agency said.

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