Is the predicted crisis this winter a failure of policy, the market, or both?
Richard Stavros is Fortnightly's Executive Editor.
The energy industry has known for quite some time now that domestic production of natural gas this century never would keep up with demand. Why else would Congress have made such great efforts in the Energy Policy Act of 2005 (EPACT) to promote more domestic drilling and infrastructure development-including construction of LNG terminals?
Alas, we may need to wait several years before EPACT makes a dent in this gloomy supply picture. Meanwhile, we'll likely have to endure a few more press releases and communiqués—some coming even from the White House—suggesting that the experts only now have awakened to the specter of price spikes and shortages.
For example, with respect to natural gas and gasoline, President Bush has urged conservation of energy resources on several occasions in the last two months—a complete policy reversal that has been equated to President Jimmy Carter's "cardigan sweater" approach to energy crises.
Furthermore, several state public utility commissions (PUCs) have issued warnings of a doubling of natural-gas bills in parts of the Northeast and other places. Electric bills also are predicted to increase by one third as a result of reliance on gas-fired power in certain regions.
On Oct. 7, the price of natural gas for November delivery closed at $13.38/MMBTU on the New York Mercantile Exchange. That was up 90 percent from the year before.