Georgia County Government - September 2008 - (Page 37)

GEMANews Hurricane Season Could Cause Natural Gas Spike, Analysts Say ccording to the Georgia Emergency Management Agency (GEMA) Hurricane Watch, as the Atlantic hurricane season proceeded in late July, many energy industry observers were taking bets on how a major storm in the Gulf of Mexico could affect already volatile commodity prices. In 2005, three big hurricanes walloped the Texas-Louisiana coastline – home to key oil refi neries and major offshore natural gas operations – and sent oil, natural gas and gasoline prices to then-record levels. Th is year, the U.S. National Oceanic and Atmospheric Administration (NOAA) predicted an above-average hurricane season, with up to 16 named storms and nine hurricanes. With concern over supply already causing energy prices to soar, investors are keeping a very close eye on the weather forecast, said Barry Munro, an oil and gas analyst with Ernst & Young. “Hurricane season plays a very direct impact on how speculators view natural gas prices. They effectively trade on weather,” he said in an interview from Madrid, where industry heavyweights were meeting for the World Petroleum Congress. Three years ago, hurricanes Katrina, Rita and Wilma disrupted supply enough to send natural gas to record highs. But by December, the market swung in the opposite direction, with an oversupply depressing prices. Only in recent months have natural gas prices begun to recover, trading above $13 per thousand cubic feet on the New York Mercantile Exchange after languishing at about half that a year ago. “The speculation left the market as people really properly assessed what the real net supply disruption was,” Munro said. Lanny Pendill, an oil and gas analyst with Edward Jones, said the market is concerned about whether there will be enough natural gas in the system for the high-demand winter season. “If you look at the natural gas inventories, at least in the U.S., right now they’re about in line with the five-year average numbers. But they’re down about 15 percent relative to where we were last year,” he said. “We’re going to have to see some pretty decent refi lls over the coming months in order to get storage levels back towards that 3.4 (trillion cubic feet) that we’ll likely require for the winter months.” Compounding the problem is the fact that North America is receiving fewer shipments of liquefied natural gas, as special tankers carrying the condensed natural gas head toward markets like Spain and Japan where they can attract a better price. A There was also uncertainty as to how hot the summer would be and whether stepped up demand for air conditioning will draw down inventories of the fuel, which is most often used to heat homes in the winter. “If we are to see an active hurricane season, and if that were to threaten future supplies, then I think we can see further spikes in natural gas prices,” Pendill said. Crude oil, which at one point was trading above $140 after hitting a record of $143, may not be affected quite as much by a hurricane as natural gas would, Munro said. “I think it’s less weather dependent because they can deliver to different terminals around the U.S. and most of the significant production in the Gulf of Mexico is still natural gas,” Munro said. The price of gasoline, which spiked dramatically in 2005 when the major storms knocked out a quarter of the Gulf’s refining capacity, may not be affected the same way this time around, Pendill said. “Right now refineries aren’t even running close to full capacity. A lot of them have actually idled back because profitability on the gasoline side just isn’t there,” he said, noting that today’s gas prices have been high enough to substantially cut into demand. A supply disruption would have to be very severe and very prolonged in order for it to find its way into gasoline prices at this point, Pendill said. “It really comes down to the wiggle room. Right now there’s not much wiggle room in oil. There’s not much wiggle room in natural gas. We have a little more on the refining side and the gasoline side, and that’s purely because gasoline demand is down,” he said. ■ Oil and gas analysts say the market is concerned whether there will be enough natural gas in the system for the high-demand winter season. SEPTEMBER 2008 www.accg.org 37 http://www.accg.org

Table of Contents Feed for the Digital Edition of Georgia County Government - September 2008

Georgia County Government - September 2008 Contents President’s Message County Matters Cobb County: Quality of Life is Job No. 1 Innovative Transportation Financing in Georgia Drive Your Fleet into the Next Generation of Efficiency, Profits Spotlight: Georgia Technology Authority Media Productions GEMA News: Hurricane Season Could Cause Natural Gas Spike GDEcD News: Communities Receive Funds to Develop Tourism Assets Georgia’s Grand Old Courthouses: Upson County Extension News: Radon: Georgia’s Silent Danger Research Corner: Conserving Fuel Costs in Your County Staff News County Parade Index of Advertisers

Georgia County Government - September 2008

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