Greenspan foresees lasting high prices for natural gas.

Byline: From Register-Guard and news service reports

WASHINGTON - High natural gas prices are likely to last into next year and could weaken some key American industries' ability to compete, Federal Reserve Chairman Alan Greenspan said Tuesday.

Greenspan stopped short of suggesting that tight natural gas supplies, which have caused prices to more than double from last year, might thwart economic recovery.

Industries that heavily rely on natural gas hope that prices will decline, but Greenspan said market signals suggest that tight supplies and high prices will persist because - unlike oil - the U.S. gas market is unable to draw on world supplies easily to meet surges in demand.

``The markets are telling us that $2 gas is a historic relic - at least for the time being,'' Greenspan told a hearing of the House Energy and Commerce Committee. Natural gas at wholesale has surged to $6.25 per thousand cubic feet, compared with an average of about $3 last year.

Greenspan said that already the increase in gas prices has ``put significant segments of the North American gas-using industry in a weakened competitive position'' against industries overseas.

The fallout from the high energy costs has been tempered because companies have made temporary adjustments, hoping prices will again soon decline.

The situation isn't as severe in Oregon and Washington, Northwest Natural Gas spokesman Steve Sechrist said.

Northwest, which has 31,766 residential and commercial customers in Lane County, may boost prices but not as dramatically as East Coast utilities hit by a winter cold spell.

Last winter was relatively mild on the West Coast, Sechrist said, which means Northwest has a plentiful supply of natural gas.

Northwest has already bought half of next winter's natural gas supply at favorable prices, he said. It will buy the other half on the spot market at prices to be determined in the next several weeks.

The relatively high spot prices will probably require Northwest to ask the state Public Utilities Commission to approve a rate increase for next fall and winter, Sechrist said.

CAPTION(S):

The Energy Department has forecast that extremely short supplies of stored natural gas will result in high prices through this year and into 2004. Gas stocks in storage were 38 percent below what they were last year and 28 percent lower than the five-year average. ``An abnormally hot summer, followed by a cold winter could push natural gas deliverability to the limit and cause record high prices,'' Guy Caruso, head of the department's Energy Information Administration, told a congressional hearing. Greenspan said the supply and price problems stem from ``a modest gap'' between growing demand for the environmentally friendly fuel and supplies that are limited. ``Rising demand for natural gas, especially as a clean-burning source of electric power, is pressing against a supply essentially restricted to North American production.'' He urged expansion of liquefied natural gas, or LNG, imports, so that the U.S. market can more easily use world gas supplies as ``a safety valve'' if North American supplies become too tight. Currently there are only four LNG terminals in operation in the United States. Rep. Lois Capps, D-Calif., said such a terminal now planned for Oxnard, Calif., has raised concerns about safety and environmental impacts and its effect on tourism and recreation. ``There are associated costs'' that must be considered, she said. Greenspan acknowledged trade-offs when pursuing energy sources. ``There is no way to create energy without risk,'' he said. Richard Sharples, a vice president of Anadarko Petroleum Corp., said a chronic gap between supply and demand needs to be addressed by removing regulatory barriers to exploration and development, and providing industry with greater access to gas reserves on federal lands. That won't help consumers this year in Ohio where Donald Mason, head of the state Public Utilities Commission, predicted that the average residential heating bill next winter will be $220 higher per household than it was last winter. He said he's trying to find a way to ``prepare (people) for the sticker shock.'' This spring, natural gas in storage dropped to 623 billion cubic feet, the lowest it has been since the government began keeping records in 1976. Stocks have rebounded somewhat. By next fall, the government would like to see about 3.5 trillion cubic feet of gas in storage to be ready for the winter heating season, or about three times the amount available now. The average natural-gas fueled home uses about 80 thousand cubic feet a year, according to the American Gas Association. --- On the Net: Energy Department forecast: http://www.eia.doe.gov American Gas Association: http://www.aga.org/