HOUSTON, June 16 -- Energy prices continued to climb June 15 after new Federal Reserve Chairman Ben S. Bernanke told the Economic Club of Chicago that expectations for US consumer price growth are within historical ranges.
"In the short run, prices are likely to remain high in an environment of strong world economic growth and a limited ability to increase energy supplies. Moreover, prices are likely to be volatile in the near term, given the small margins of excess capacity to produce crude oil or natural gas that traditionally have buffered short-run shifts in supply and demand," said Bernanke.
However, he said, "In the long run, market forces will respond. The higher relative prices of energy will create incentives for businesses to create new, energy-saving technologies and for energy consumers to adopt them. The market for alternative fuels is growing rapidly and will help to shift consumption away from petroleum-based fuels. Government can contribute to these conservation efforts by working to create a regulatory environment that encourages the growth in energy supplies in a manner that is consistent with our nation's environmental and other objectives. Given the extraordinary resilience of the US economy, I am confident our nation will be up to this challenge."
American Chemistry Council Pres. & CEO Jack N. Gerard said June 16 he is "intrigued" by Bernanke's comments on alternative energy. "Policymakers have called for doublingor even quadruplingthe nation's production of ethanol and hydrogen in order to reduce demand for other fuels," Gerhard said. "It is vital to recognize that ethanol and hydrogen as well as clean power generation, clean diesel, lightweight vehicles, and energy-efficient materials all require large amounts of natural gas. If members of Congress support these alternative and clean energies, then they must support access to new sources of natural gas supply."
The latest rise in energy prices was led by natural gas with the July contract escalating by 61.7¢ to $7.21/MMbtu June 15 on the New York Mercantile Exchange. That was triggered by an Energy Information Administration report of a smaller-than-expected injection of 77 bcf of gas into US underground storage in the week ended June 9 (OGJ Online, June 15, 2006). Above-average temperatures through most of the central and eastern states are expected to boost demand for cooling 20% above average through June 22, said analysts at Enerfax Daily.
The July contract for benchmark US light, sweet crudes rose by 36¢ to $69.50/bbl on NYMEX, while the August contract increased by 31¢ to $69.93/bbl. On the US spot market, West Texas Intermediate was up 36¢ to $69.50/bbl. Gasoline for July delivery increased 0.37¢ but was still essentially unchanged at $2.04/gal on NYMEX. Heating oil for the same month inched up by 0.1¢ but was virtually unchanged at $1.94/gal.
In London, the July IPE contract for North Sea Brent crude gained 45¢ to $67.43/bbl. The July gas oil contract was up by $5.25 to $618.75/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes increased by 44¢ to $63.10/bbl on June 15.
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