Energy Crises.

Major parts of the US faced serious energy crises during the past three years. The power blackouts in both California in 2000 and the US north-east and a part of Canada on Aug. 14, 2003, together with power blackouts in Europe last autumn, reminded the world how completely life in the rich countries depended on electricity.

Among the many lessons learnt in the US was that the more market-oriented electricity business - no matter how efficient - has become more vulnerable to system failure than one that is state-controlled or centrally co-ordinated. As John Kay put it in the FT of Oct. 1, 2003, there are "trade-offs". And, he added, "if the reaction of fellow passengers in the unlit departure lounges of Rome airport is any guide, (throughout the Western world) tolerance of system failure in electricity supply is very low".

Huge capital is going into major new power generation capacity in various parts of the US. A big number of power plants will require natural gas which should be imported from distant sources of LNG (see the US power projects and US-bound LNG export ventures in Part 3 in last week's Review).

The shortage of natural gas in the US, worsening the effect of shortages in power generation in California and other parts of the country, has caused a spike in retail gas prices and this has become a hot political issue on the eve of an election year.

The price of natural gas in the US north-east has risen 300% in the past three years. At one time during winter in California, the spot price of natural gas rose above $40/m BTU. The high cost of natural gas has badly affected a number of industries, many of which have since moved out of the US or out of business.

The heating oil and gasoline prices are another hot political issue for the Bush administration, with Republican President George W. Bush bent on getting re-elected in November 2004. Price spikes for retail heating oil in winter and for retail gasoline during the driving season hit hard, although generally wasteful American consumers can afford them. Because of the coming presidential elections and the expensive campaigns that precede them, fuel consumers and SUV drivers are becoming edgy.

Last Sept. 5, President Bush ordered a federal investigation into an August spike in retail gasoline prices despite a 25% fall in the previous week.

Bush had been urged by Democrats to investigate the run-up over one week in late August in retail gasoline prices by 12 cents to nearly $1.75 a gallon. The Democrats blamed Saudi Arabia for contributing to the rise by reducing August shipments of crude oil to the US. But then prices of both gasoline and crude oil in the US were falling rapidly. By Sept. 2, the day after the end of the summer driving season, the price of gasoline had fallen to 84.74 cents per gallon.

When heavy snowfall in the US north-east began earlier this month, the retail price of heating oil shot up and became a hot issue for politicians. Now some Democrats in the Senate and the House of Representatives are calling for an investigation into those new spikes.