Energy markets need more, not less, price transparency. But come January traders may have even less information to go on, creating a higher risk for boom-and-bust price swings at a time when the US craves stability.
The American Gas Association earlier this month said it will discontinue its weekly natural gas storage report gas as of Jan. 2 (OGJ Online, Oct. 12, 2001). The association said it is dropping the survey because assembling it is not cost-efficient for staff or its members.
The decision was likely made easier following complaints by some traders and analysts who said recent reporting delays and corrections made the survey unreliable.
AGA wants the US Energy Information Administration to oversee a weekly storage survey. But EIA says no decision has been made by "management" (aka the White House) on whether it will be given the budget or staff. And even if the White House is willing to commit extra funds, it could be several months before the agency untangles the red tape to issue a timely report.
Money and time aren't the only problems. AGA's report was voluntary, and given national security worries, some energy companies, and even AGA, have said that EIA asks too many questions already. That means policy-makers must also struggle with balancing the need for transparent energy markets with homeland security.
The contractor that now helps prepare EIA's weekly oil report , Z Inc., says that if EIA makes the decision to do more timely gas statistics, it could adjust.
EIA now prepares a monthly gas storage report in-house.
The American Petroleum Institute, which also issues its own weekly oil numbers, has thrown its hat into the ring as well. Other undisclosed, private companies want in. Meanwhile, analysts want AGA to continue doing the report until the dust settles, at least through the spring.
Even before AGA's announcement, some regulators were calling for more market indicators. Federal Energy Regulatory Commission Chairman Patrick Wood III recently complained traders rely too heavily on AGA's storage data, creating a widely fluctuating futures market.
An upcoming General Accounting Office report is expected to make the same argument and call for EIA to step in regardless of who takes over the AGA report. The Commodities Futures Trading Commission may also weigh in to guard against market manipulation. CFTC will no doubt want to check how the numbers are prepared and which methodology used.
And some groups, such as the American Public Gas Association, want Congress to guarantee EIA steps in. "EIA has the power and obligation" to collect the necessary information, the group wrote lawmakers Sept. 24, 2 weeks before AGA's announcement.
Done correctly, the report could be a "million-dollar " operation for EIA or a private company, says an energy economist. But done poorly, it could destroy a business and more importantly, wreak havoc with energy security.