Home heating bill to send chill down US spine

Natural gas prices have set a record in the US, presaging higher heating bills for a majority of Americans in the northern winter as well as soaring costs for manufacturers of products such as plastics and chemicals.

Since the beginning of the northern summer, the price of gas has doubled. Unlike crude oil or petrol, whose gains have been felt by most Americans, the surge in gas prices, the most popular form of energy for home heating, has so far gone largely unnoticed.

That is about to change as colder weather sets in. A hot summer, which pushed up natural gas consumption by electricity companies and depleted winter stocks, is expected to give way to a cold winter, which will push up home consumption. Meanwhile, the Gulf Coast, the nation’s largest energy hub, has suffered devastating punches from two severe hurricanes. All these factors have come together to create a natural gas crisis.

“It’s still under most people’s radar screen right now,” said Carl Neill, an analyst at Risk Management, a natural gas consultant and brokerage firm in Chicago.

“The public has absolutely no idea how high prices are going to be this year. It’s going to be mind-boggling. Prices are going to be 50 to 100 per cent higher for residential consumers.”

Gas prices for November delivery gained US9.6¢, or 0.7 per cent, to close at $US14.20 per thousand cubic feet on Thursday in the US on the New York Mercantile Exchange, after trading as high as $US14.58.

Natural gas is costing more than three times the $US4.70 it averaged since 2000 and seven times the average price of the 1990s, which was $US2 a thousand cubic feet.

In the Gulf of Mexico, which supplies 16 per cent of the natural gas used in homes, businesses, industries and power plants, about 80per cent of the gas production remains shut, nearly a week after Hurricane Rita made landfall.

Natural gas prices have been setting records since Hurricane Katrina pushed prices beyond $US10.10 per thousand cubic feet.

Even before that, prices had been rising from around $US7.50 in June, as electricity generators, which account for about a quarter of gas consumption, increased their output to meet higher power consumption for air conditioning.

“Call it supply constrained or whatever, we have a natural gas market that is tight,” said Chris McGill, the managing director of policy analysis at the American Gas Association. “We’re meeting demand but at higher prices.”

The back-to-back hurricanes highlighted how precarious the US’s energy supplies were, as they stretched the country’s refining system and crippled petrol distribution for days.

About 15 per cent of the country’s oil refining capacity is expected to be out of service for weeks.