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Gas and Heating Prices Expected To Be High Through 2006
WASHINGTON (AP) - People may have to get used to high gasoline and heating costs
since tight energy markets are projected through 2006, industry and government
officials said.
Howard Gruenspecht, deputy administrator of the Energy Information Administration,
said average gasoline prices are likely to be higher although not as high as
in the aftermath of the hurricanes that disrupted supplies from the Gulf Coast
region.
He said that the EIA, the Energy Department's statistical agency, has revised
upward its expectations of crude oil prices over the next few years and that
crude prices are not likely to decline much from current levels in 2006.
"We don't see a big softening" in oil prices, said Gruenspecht.
Crude oil has hovered around $60 a barrel and natural gas prices for delivery
in January soared to nearly $15 a thousand cubic feet, although retreating
somewhat on the New York Mercantile Exchange. Natural gas cost about $7 a thousand
cubic
feet a year ago.
While gasoline prices had dropped for nine straight weeks to a national average
of about $2.15 a gallon, stocks of the motor fuel "are far below last year's
levels" right now, which could contribute to tight gasoline supplies,
he said.
Gruenspecht said a number of refiners also are expected to stop using the
additive MTBE next year which could put more upward pressure on prices at the
pump in
2006. MTBE is used to reduce tailpipe emissions, but also has been found to
contaminate drinking water supplies. The energy law enacted earlier in 2005
removes the requirements
for refiners to use an oxygenate, such as MTBE, for clean air purposes.
But MTBE accounts for about 11 percent of the fuel by volume and while refiners
could add ethanol, eliminating its use may require some refiners to produce
more gasoline, putting added pressure on refiners.
Meanwhile, high heating prices in 2005 might not be an anomaly, said David
Parker, president of the American Gas Association, who along with Gruenspecht
and several
other energy industry executives, participated in a news conference sponsored
by the trade publication Energy Daily.
If there is a hotter than normal summer putting high demand on natural gas
supplies next winter "will be equally as bas as 2005," said Parker.
He said there already are signs of trouble for 2006-07, citing the trend of
continuing
high natural gas prices and expectations of a warmer than normal summer.
The continuation of high fuel prices will make it harder for gas utilities
to mitigate their retail prices through market hedging and will force them
to pay
more for gas that they put into storage during summer months, meaning higher
prices next winter. Parker said if there is a normal winter there should
be no interruption of natural gas supplies.
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