IECA: US 'natural gas crisis' began in mid-2000

Dec. 22, 2003
Washington, DC-based Industrial Energy Consumers of America (IECA) sent the US Congress a report showing that natural gas prices increased 83% during a 41-month period, costing consumers more than $111 billion.

Washington, DC-based Industrial Energy Consumers of America (IECA) sent the US Congress a report showing that natural gas prices increased 83% during a 41-month period, costing consumers more than $111 billion. IECA is a nonprofit organization promoting the interests of manufacturing companies.

Saying that the "gas crisis" started in June 2000, the report compared the current 41-month Henry Hub price with the previous 41 months.

The 41-month average price from June 2000 to October 2003 was $4.34/MMbtu. The previous 41-month average price from January 1997 through May 2000 was $2.37/MMbtu.

"This means consumers paid $1.97/MMbtu more for natural gas during the natural gas crisis, an 83% increase," the report said.

Meanwhile, crude oil prices increased 46% during the same time period. That increase included high prices caused by the war in Iraq, the report said.

"The natural gas crisis has had a staggering direct and indirect impact on all consumers, the US economy, and especially manufacturing," said IECA Executive Director Paul N. Cicio. "The $111 billion is just the tip of the iceberg, and it cost the economy a lot of jobs that may never return."

Congressional reaction

US House Energy and Commerce Committee Chairman Billy Tauzin (R-La.) said, "Natural gas prices in the US are out of control and our nation's homeowners and businesses are footing the bill."

He said the IECA report's findings on gas costs are "unacceptable and must be addressed. As we head into the cold winter months, natural gas prices will continue to rise unless Congress takes action."

IECA findings

The report said increased gas prices cost industrial consumers $57 billion, residential consumers $33 billion, and commercial consumers $21 billion during the most recent 41-month period.

"Every penny of the $111 billion could have been prevented and was totally unnecessary. The US is blessed with enormous natural gas reserves, yet we do not lift drilling moratoriums," the report said.

"Unfortunately, there is no end in sight to these high and sustained natural gas prices that are the highest in the world," the report said. It also said that manufacturing jobs are affected when gas prices rise significantly.

"While the economy reported an increase of 160,000 new jobs in October 2003, manufacturing employment fell by another 24,000, the 39th consecutive monthly drop. Since July 2000, the number of factory jobs is down by nearly 2.8 million.

"Every US economic recession has been preceded by high energy prices, and this recession was no different. IECA believes the natural gas crisis started in June 2000. Government officials say the US recession officially began in March 2001," the report said.

It also said that the real cost is actually higher than the $111 billion cited, considering other direct and indirect factors including:

Consumption of gas by electric utilities, and the effect that higher gas prices have caused by increasing electricity prices.

Lower gas demand by manufacturing because of "demand destruction" caused by higher gas prices.

The financial loss of corporate-related tax income and higher heating and cooling bills on states, cities, county governments, school systems, and financial pressure on human services.