Somebody needs to explain markets to Henry Hyde.
The Republican congressman from Illinois thumped the drum for a federal investigation when gasoline prices spurted in his Chicago-area district last March.
Now he's thumping the same drum about natural gas.
What's to investigate?
Last spring, there was barely enough-and in some cases not enough-gasoline able to meet Chicago-area volume and product-quality needs.
Now there is barely enough natural gas to meet current demand with the winter heating season just beginning.
Prices rise under these circumstances. It's the market.
So why does Hyde say things like this, from a statement issued Oct. 10: "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."
Hinting? Nobody's hinting. And why rely on "industry sources"?
The Energy Information Administration has forthrightly predicted price increases for natural gas and clearly defined the reasons: expectations for a 6.1% demand gain over last year, US production up only slightly, working gas in storage at the beginning of the heating season 227 bcf below the 1995-99 average of 2.757 tcf. Imports will increase to make up the shortfall from domestic supply.
There's no hinting about it. The supply system must strain to meet demand. Prices will be high.
But Hyde presses on.
"Consumers need to know whether or not producers and utility companies deliberately diminished reserves of natural gas in order to drive the price up," he says in the Oct. 10 statement.
In fact, producers increased reserves by 2.1% last year: from 164.041 tcf to 167.406 tcf. Again, the numbers aren't "hints" from "industry sources" but data published in September by the EIA. So who needs an investigation?
The increase in reserves that Hyde somehow missed was especially impressive following the ruinous years producers experienced in 1998 and 1999, when natural gas prices were abysmal.
Producers at that time were going bust, not deliberately diminishing reserves, which makes Hyde's allegations offensive. If it were in the power of producers to manipulate prices, they would have done so in 1998 and the early part of 1999 in self-defense.
It's not in their power because of competition. Again, it's the market.
Instead of diminishing reserves, in fact, producers have been drilling gas wells as fast as they can put their business back together. In 1998, the number of active rigs on gas wells averaged 560, the second highest average since EIA began subdividing the rig count by well type in 1988.
The average dropped to 496 in 1999-still better than most years of the 1990s. And this year gas-well drilling has zoomed. EIA puts the 8-month average gas-well rig count through August at 660, with August's average alone at 779.
This is not the behavior of an industry trying to cut supply to raise prices.
Hyde is just wrong.
In his statement about a gas-price investigation, he implies that his earlier request for a gasoline-price inquiry contributed to the price decline that inevitably happened. What nonsense.
Hyde is practicing cheap demagoguery at the expense of the very gas producers on whom his constituents will depend to an extraordinary degree this winter. His tactics are divisive, his allegations hollow. And his bluster will do nothing to help Illinois residents stay warm in the months ahead.
