The Other Gas Price Rise

As everyone knows, the price of natural gas is on the rise, just like the price of gasoline. However, I did not know how much prices had risen in the last couple of years until I saw this chart:

















The price at the close today was $12.44 per million British Thermal Units (BTUs), roughly equivalent to 1000 cubic feet of natural gas. This is already a roughly 43% increase from the high of last winter's high of around $8.70 per million BTUs, and the winter hasn't even started yet.

Unfortunately, the situation is likely to become worse soon. Much worse.

Dr. Michael Economides is a professor of chemical and petroleum engineering at the University of Houston. Among other things, he is famous for predicting, a year in advance, that oil prices at this time would be $65 a barrel. He is now predicting that we will see prices of $100 a barrel in 2006, based mainly on events in Russia, China, and Venezuela (OPEC will have little, if any, impact).

However, last week he told the Midland (TX) Reporter-Telegram that he is much more impressed with a coming spike in natural gas prices. Hurricane Katrina severely disrupted the supply of natural gas from the Gulf of Mexico that is not likely to be restored until around Christmas. No doubt Hurricane Rita did not make the situation any better.

Dr. Economides says that the end result will be a price of $20 per thousand cubic feet of gas at Christmas, which will make for a very unpleasant holiday season this year for those of us in the Midwest. That would be a 400% increase over the average price from just two winters ago. Given Dr. Economides' track record, I certainly do not want to bet against him.

I can only hope that the above average temperatures we have had in September in Iowa will carry on for a few more months yet, and prevent a very difficult situation for low-income people.