Natural gas will hurt, too
Gargi Chakrabarty
Published June 16, 2008 at 9:05 p.m.
This summer, gas pumps are shocking drivers.
Come winter, heating furnaces could shock homeowners.
Skyrocketing natural gas prices will more than double the cost of heating homes for Coloradans this winter compared with five years earlier, according to Energy Outreach Colorado, a Denver-based nonprofit that helps needy families pay utility bills.
For a typical Xcel Energy customer, the combined natural gas and electric bill for the six winter months beginning Nov. 1 through April 30, 2009, will be $1,223, the EOC estimates.
That is more than double the six-month average of $583 in winter 2002-2003 and nearly 23 percent higher than last winter.
Denver Mayor John Hickenlooper said it looks as if this will be a painful winter for natural gas prices but that homeowners could drive down prices through conservation.
"I am optimistic if natural gas consumption goes down, we will drive prices back down," Hickenlooper said Monday at the National Energy and Utility Affordability Conference in downtown Denver. "Investing in weatherization or more efficient windows reduces consumption."
The energy affordability conference, which winds up Wednesday, is hosting 700 attendees.
Xcel spokesman Tom Henley said the utility will project winter bills in September.
EOC Executive Director Skip Arnold said this winter will be particularly painful for low-income and elderly people on a fixed income because they already have been hurt by the rise in grocery and gas prices.
Today, natural gas is hovering above $12 per million Btu (British thermal unit) on the New York Mercantile Exchange - up from $7 in January. The futures price for January 2009 is nearly $14.
"I am really alarmed at the way next winter prices are shaping up," Arnold said. "It looks to us now that next winter home energy prices will be, by far, the highest that we have ever seen.
"In fact, over 20 percent more than the year following hurricanes Rita and Katrina," Arnold added.
In past months, Colorado has been reeling from the joint impact of higher prices and a weakening economy.
For instance, the opening of the $4.4 billion Rockies Express Pipeline has narrowed the price advantage of $3 to $5 per million Btu that Colorado has enjoyed compared to the rest of the nation.
Ever since the pipeline began delivering natural gas from Colorado to the Midwest in January, local prices have become more competitive, and the price gap has narrowed to $1 to $2 per million Btu.
This past winter, Colorado distributed $40.5 million in federal energy assistance to low-income households during the six months ending April 30. That's higher than recent years, except the winter of 2005-2006 after hurricanes Rita and Katrina played havoc with energy prices, and federal assistance touched $59 million.
But the federal money this past winter was augmented with $2.15 million from the EOC, $1.5 million in matching funds and $6 million from the state in cash assistance for low-income families.
chakrabartyg@RockyMountainNews.com or 303-954-2976
A look back at the average bill
Combined natural gas and electric bills for an average Xcel Energy household for the six winter months Nov. 1 through April 30.
2006-07 $978
2005-06 $1,083
2004-05 $935
2003-04 $841
2002-03 $583
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June 17, 2008
8:18 a.m.
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RJS07 writes:
The price of natural gas is tied to the price of crude oil. It will not improve until something is done about crude oil. It is time to drill here, drill now, AND to rethink the way the big hedge funds are allowed to manipulate the market. As well we can continue to promote alternative energy sources. We need to DO IT ALL!
June 17, 2008
8:32 a.m.
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Darwin writes:
We get what we vote for folks. Democrats and Republicans in Congress refuse to authorize drilling in the OCS, ANWR, and in many other places. Would such authorization solve the energy problem, no, but it would help while we develop and mature alternative forms of energy. The answer from Congress, use a vital food source (corn) as an inefficient fuel source and thereby causing, in large part, a huge increase in food costs. I would like to think that we would vote the bums out, but party loyalists on both sides will continue to vote for whomever their party says. Is it any wonder that their approval rating is even lower than the President's.
June 17, 2008
8:51 a.m.
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pak writes:
The high price of gas is directly tied to the increased use of renewables and less coal base load generation. Renewables work only 33% of the time and have to be backed up by dispatchable gas plants which places huge demands on gas resources. Gas plants are also being mis-used as baseload electricity generators.
We import 20% of this nation's gas as the form of LNG and the world price of LNG is 50% higher than domestic gas resources.
Start building base load coal plants and you will see the price of gas come way down. The answer is baseload coal plants!!!
June 17, 2008
9:08 a.m.
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Dinty writes:
Oh, my god. The sky is falling. Scare all the old people. Get your children off the street. And, we wonder why consumer confidence is in the tank.
June 17, 2008
9:13 a.m.
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Dinty writes:
PS. Ever notice the common recurring sensational adjectives that the news media use to shock us all? Try looking for them: "soaring, skyrocketing, plummeting, etc." I'm pretty sure there's a common Liberal media thesaurus out that they all use to spread gloom and doom.
June 17, 2008
9:28 a.m.
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JustSayin writes:
^^ Is that on the same shelf as the "Don't change your wasteful ways, despoil the land now" handbook and the "Conservationists hate America" Cliff Notes?
June 17, 2008
9:52 a.m.
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RickyLee writes:
Let's keep Colorado's natural gas HERE, instead of shipping it everywhere else and driving our prices up.
June 17, 2008
9:59 a.m.
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Diff writes:
Tell me why the natural gas market is also going to reach new records? Usage here is also holding steady - not an increase in demand - prodution remains strong.
Natural Gas and oil/motor fuels are different markets. Used in different mediums and are not connected.
Like oil and Gasoline, normal market forces are not drive prices higher.
Greed is at work here! Speculator and market manipulators.
The oil and gasoline supply levels have been over the past 6 months in the average ranges.(or above) Usage, as measured by retail delivery of gasoline has trended down January - April and only recently has picked up, but still remains below the average levels.
Also consider that refinery utilization sits at BELOW 90%
WE the AMERICAN People are being screwed by the energy companies ie BIG OIL -
Plane and simple-
Follow the money! Look at the record profits of the large oil companies!
Write your congress and Senate Reps - it is time for a congressional investigation! (It's over due!)
June 17, 2008
10:24 a.m.
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kodijack writes:
Diff - I...don't even know where to start. Your ignorance on this subject is amazing. Suffice it to say that everything single thing you wrote...is wrong.
Natural gas and crude oil prices are historically linked. Look it up.
Normal market forces DO drive prices.
Greed only for the Chinese and Indian people who are using 50% more crude oil than they were even two years ago.
There are things that keep refinery utilization down, not idleness or non-need.
The profits of the oil companies are based on prices and costs, not market manipulation.
Stop, seriously. Start reading, spend a year doing that, and then start making comments again. You could not have been more wrong.
June 17, 2008
10:51 a.m.
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Who_Me writes:
It hurts me mostly after eating spicy Mexican food, but otherwise, it feels fine, no problems at all with it.
June 17, 2008
11:12 a.m.
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Big_D writes:
Colorado should take the profits from its gas sales and help reduce prices. The State of Colorado is a natural gas exporter and will be making money with the increase. Too bad the Owens contracts will be used to make Minnesota money not Colorado.
June 17, 2008
12:03 p.m.
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ilovegambling writes:
"Gene writes:
Just do it. Drill.
Do it for the children, Ritter. Just drill."
Seriously? This issue is absolute proof that you can't drill your way out of high energy costs. There are more gas wells in western Colorado, and all over Wyoming now more than ever! Ritter has nothing to do with this.
June 17, 2008
12:23 p.m.
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ISKIFREELY writes:
I'm sure someone here will blame Bush. Wait for it...
June 17, 2008
12:51 p.m.
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Logical writes:
Where to begin? ilovegambling - we can to drill our way out of high energy costs! There are pipelines running out of the area, which weren't there 10 years ago when we paid $1.65/ mcf of gas. Now we pay around $7 (fluctuates daily) for that same mcf, since others want our gas, and have a means to get it (pipelines). If we produce more gas than we can ship out, the price we pay will be stable, or rise more slowly. East-coast markets paid $20/ mcf last winter. If we don't produce more, we will be paying alot more, since the east will gladly pay $12/ mcf for our gas, forcing us to pay more to keep some gas here for us to use.
Diff - do what Kodijack says, and read. Also, Big Oil (oh, those nasty companies!) ARE trying to keep prices down by drilling more wells, but Ritter and the treehuggers don't want to let them. Okay, so they are not wanting to drill with the intent of keeping prices down, as they want to make profits from the sale of gas, but if they produce more (by drilling more wells), the price we pay won't go up as fast as if they don't have more gas to sell. We should be writing congress to allow more drilling, not to whine about how a company is making a profit.
RickyLee - What commune do you live in? Exportation to increase the value of our product (natural gas) is how the world works. In a closed economy (commune), no one gets ahead, or betters his lifestyle. For you to get a raise, the company you work for has to sell their product for a higher price. That is usually accomplished by increasing the market or demand for whatever you produce. If the demand never increases, the price for that good won't go up, and no one you work with would ever get a raise. We have to export, as the demand is from out of this area. And, the gas that is exported creates income for Colorado in the form of sales and severance taxes. So, our personal taxes can stay lower as a result of more income to the state of Colorado thru corporate tax revenue on our exported gas. Exporting is good.
That's enough economics for one day.
June 17, 2008
1:55 p.m.
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ISKIFREELY writes:
Thank you, huffdiver. Right on cue.
June 17, 2008
3:07 p.m.
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Diff writes:
kodijack - I don't think it called for to start name calling. I am I AM SURE at least as SMART as YOU!
(spent some time studying Economics as well, BTW significant time...)
Do you understand the concept of Supply and Demand as the basic economic model that affects prices?
Take a look at a EIA Web site called -This Week in Petroleum-
With current and historic data about oil and motor fuel prices, supply and demand.
IT clearly supports what I've stated about usage and supply levels.
Sure there are some simple speculators in the oil market - riding it for what it is worth to them,and maybe affecting the price increase a bit, plus falling dollar accounts for some (maybe as much as 15-20%) of the increased prise - BUT NOT ALL!
Take a look at those facts -
Then see if you want to argue the point about my being suspect about price manipulation via the EXCUSE of speculation.
Supply and demand DO NOT account for the price spike over the last 9-12 months. ( A fact I CHALLENGE you put forth a sustainable argument against - and back it up with sources ... if you can.)
And As far as Refinery utilization - in past years as the summer months begin it has been at or over 90% and often reaches 95% not 85% which has been the case in recent months -
( it is seldom much higher than 95% - I realize that)
Tell me the BASTARD oil companies are not GREEDY.
Tell me again how a companies profits are not linked to prices being raised, in the case by guess who - the OIL COMPANIES.
I respectfully submit that you are the one who needs to do a little reading before you just make the statement that what someone else said is .. wrong -
Oh and a little bet - you work for an oil company or related business - I'd bet a tank of GAS you do or someone in your family does!
June 17, 2008
3:26 p.m.
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Diff writes:
Logical - AS for the oil companies exploring and drilling for more oil and gas for the general good of the public - thats is laughable.
What they are doing is trying to take advantage of the current price spike as much as they can - for if it is a true bubble it will break - and the price will fall - tho probably never to previous levels.
Again it comes down to GREED!
BTW I am certain I have read as much as you and kodijack combined on economics or energy markets, or business models. (pick any one)
I am not one who thinks companies should not make a profit but..
If a company - any company has profits that spike in percentage as much as the oil companies; 30-40% and more Based on a NEEDED commodity and the price spike without being clear economic causes - I think it is more than appropriate to whine and or investigate or BOTH!
Also consider it is the oil companies who control this market, at least a major portion of it from the ground to the retail point of sale with very little competition from middle suppliers etc
Do you too work for some concern related to the oil or energy business?
June 17, 2008
4:03 p.m.
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Logical writes:
Diff,
I didn't say the oil companies wanted to drill "for the good of the public", but lower/restrained pricing is what will come of additional drilling, and that is good for the public. Additional supply will keep prices from rising as fast, and may even bring them down a little.
Greed? When oil companies are making approx. 8.3% profit vs. sales, why is that greed? The average profit margin by companies that produce a consumer product is 8.9%. So, oil companies are making less than the norm for the sector. How about IT companies (Google, Amazon, for instance) who make 19% profit? Why aren't you hollering about their "greed" and obscene profits?
So what if the oil companies have a spike of 30-40% in their profits? That means they have been in the 5.5% - 6% profit margin just prior to this. They have to ahve some type of profit so they can invest in new equipment, reserves, and infrastructure. Do you give all of your "profits" (savings, discretionary income) back to charities or the government? I didn't think so. Profits in energy are cyclical, and there are periods where energy companies lose money. Profits pay back those losses.
The more they produce, the better for all of us, as it will keep prices in check. Isn't that what we want?
June 17, 2008
5:31 p.m.
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Diff writes:
Logical - What is your source for the percent of profit VS Sale for the oil companies?
I believe you are way off the actual amounts - you have to look at several market segments - Oil, refinery sales to retaliers and then retail sales - the big oil companies have a cut at each level, under different subsidiaries and divisions etc.
I am out the door and do not have the time to look for sources just now, but I have heard figures as high as 30% and even more ....
You do try hard to make it sound as if the oil companies are good guys, looking out for you and I.
As for the Googles and mircosofts and their high profit margins - I think they are greedy too but not at the expense of the whole economy - those are things we can chose to do without, while Gasoline and other products from oil are NEEDS in our little corner of the world and their increases cost run through every part of the economy..
I for one think they need to be much more carefully watched and regulated....
June 18, 2008
2:34 p.m.
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Diff writes:
For what it's worth: from the EIA website on This week in Petroleum;
Low Refinery Utilization and High Prices?
Refinery utilization was lower than typical in first quarter 2008. Actual first-quarter 2008 utilization averaged 84.7 percent, compared to the average of 89.1 percent during first quarter 2001 through 2005 (years where first quarter volumes were not significantly impacted by hurricanes). In April and May, utilization remained low, averaging 86.1 compared to an average of 94.1 for the two months during 2001-2005. While petroleum product prices are continuing to break new records, why is refining capacity utilization low? And would increasing refinery utilization reduce those prices?
Refinery outages seem to be running at relatively normal levels in 2008, implying that discretionary cutbacks represented a 4- to 5-percentage-point reduction in utilization during the first quarter, and about an 8-percentage-point reduction in April and May.