September 30, 2005

Energy conservation may avert natural gas supply crunch

WEST LAFAYETTE, Ind. - Those who remember the energy crisis of the '70s may want to turn off the lights and lower the thermostat in order to avoid a natural gas crunch this winter.

Natural gas prices have jumped dramatically in the past couple of months, and a Purdue University agricultural economist said that supply might also become an issue as natural gas production has decreased due to hurricanes Katrina and Rita.

"The fear is that the production we are losing now will cause shortages this winter," said Otto Doering. "New gas supplies cannot be brought on line quickly."

He said the only additional supply available is liquefied natural gas imported from the Middle East. "However, there are a limited number tankers to transport it and fewer port facilities to receive it," Doering said.

Doering said high prices could help keep adequate supplies of natural gas available. "With little flexibility to increase supply or reduce demand, a big price increase creates the incentive to limit use," he said.

Doering said homeowners can make a difference by cutting back on energy use, even if it's just a little. He said during the winter of 1973-74 when the propane price doubled, Indiana residents reduced propane gas usage by 15 percent, which helped bring prices down in the spring.

"Conserving 10 percent would make a big difference right now," he said. "We are at a tipping point where a small surplus that is expected to continue for a while could eventually greatly reduce prices."

Doering said while the concern is most dramatic for conserving natural gas directly, conserving electricity will also affect the situation because one quarter of our electricity is generated by burning natural gas.

"Virtually all of our new electric generating capacity in recent years has been fueled by natural gas," he said. "If we add an electric heater in our home this winter, the extra electricity we use will likely come from a generator fired by natural gas."

Natural gas prices have reached $14 per 1,000 cubic feet, up from $7.50 in July. While the price has nearly doubled, Doering said consumers should not expect to pay twice as much.

"The question is whether your utility bought gas when prices were low," he said. "Few homeowners should see their gas prices double, but prices may go up 50 percent for many."

Writer: Beth Forbes, (765) 494-2722, forbes@purdue.edu

Source: Otto Doering, (765) 494-4226, doering@purdue.edu

Ag Communications: (765) 494-2722;
Beth Forbes, forbes@purdue.edu
Agriculture News Page

To the News Service home page