US Rep. Henry Hyde (R-Ill.) last week asked the US Federal Trade Commission to undertake an investigation of expected high natural gas prices this winter to determine if they are the result of collusion in the market.
"I don't know what he means, given the competitiveness of the industry," said R. Skip Horvath, president of the Natural Gas Supply Association, in response to the request.
Horvath noted there are 8,000 producers in the US industry.
"If you took the top five, they only have a 17% market share, Horvath says. "That's a very low concentration."
Hyde request
In his letter to FTC Chairman Robert Pitofsky, Hyde writes, "Last year, when prices were lower, producers cut their production. That production cut has led to the current shortage with corresponding higher prices. Such production cuts could be a legitimate response to market forces. On the other hand, if they were done collusively, they could violate antitrust laws."
Hyde said consumers need to know whether or not producers and utility companies deliberately diminished supplies of natural gas in order to drive the price up.
"Industry sources are hinting in press reports that natural gas used to heat millions of homes may skyrocket as much as 90% in the month ahead, and I think we must move quickly to find out if and why that is true," Hyde said.
Hyde said an FTC investigation of natural gas prices will send an important signal to producers and utilities that federal regulators are monitoring activity that might be considered anticompetitive.
Industry response
Horvath said Hyde is correct in that prices are higher due, in part, to cuts in production after the industry received low price signals in 1998 and 1999. The good news is that higher prices are spurring more producers to get more gas to market, Horvath said.
For the week ended Oct. 6, the number of rigs drilling for natural gas in the US and Canada rose to 833, up 27 over the previous week and 234 over the same period a year ago, according to the Baker Hughes rig count.
"Producers of natural gas are individually working as hard as they can to bring more natural gas to the market. In fact, there are twice as many rigs today as there were in April 1999, when prices and rigs were at their lowest in recent history, indicating a tremendous response by producers," Mike Johnson, vice-president and general manager of Conoco Inc. explained earlier this year in testimony before the Senate energy and natural resources committee.
