Natural gas prices to rise

A government report says that natural-gas supplies last month were down from a year ago but still higher than normal.

A substantial price jump from last year is expected for natural gas this summer, which could mean increased heating costs next winter.

Even though supplies are in good shape, fears are building that slowing production, higher demand this summer, and uncertain supplies from Canada could combine to boost daily wholesale prices by nearly 18 percent this summer, a government report says.

Those factors could cut into supplies for the fall and winter, which in turn could boost homeowners' costs for the heating fuel by year's end, analysts said.

A short-term energy outlook by the U.S. Energy Information Administration said this week that the spot market price for natural gas this year would be 13 percent, or 89 cents per 1,000 cubic feet, higher than the 2006 price.

Tancred Lidderdale, energy information analyst, said that although natural gas supplies at the start of last summer were at record levels, "essentially you're starting out with a little bit lower inventory this year."

Supplies last month were 1,569 billion cubic feet, down from 1,696 billion a year ago but still the second-highest end-of-winter measurement ever, the government report shows.

Production of natural gas is expected to increase by 1.4 percent this year, and the government anticipates factors that could tap the inventory.

"Last September, the price of natural gas crashed without any hurricane damage," Mr. Lidderdale said. But this year the threat of hurricane damage is greater.

Also, much of the United States had a mild summer last summer. But if temperatures soar this year, natural-gas-fueled standby power plants could be called upon to generate more electricity to run air conditioners.

Jim Halloran, an energy analyst with National City Private Client Group in Cleveland, said an unstable supply from Canada - which provides 8 to 10 percent of U.S. natural gas - is of concern. Gas drilling in Canada has slowed, and more of the fuel is being used for home heating and for production of synthetic oil than in the past, Mr. Halloran said.

The ethanol industry also could affect natural gas supplies. High amounts of nitrogen fertilizer will be needed for the large corn crops farmers intend to plant to supply ethanol distillers. That fertilizer comes from natural gas, he said.

The retail price of natural gas for Columbia Gas of Ohio customers in metro Toledo has been lower this year than a year ago. With only a few weeks of bitter cold, area heating bills generally were less than they were a year earlier.

Contact Jon Chavez at:

jchavez@theblade.com

or 419-724-6128.