The Blue Flame Burns
Federal price controls come off much of the nation’s natural gas supplies today, and through a generally fortuitous set of circumstances, Southern Californians will not even notice it. There will be nary a sputter in the quiet blue flame burning in the hot-water heater, the wall furnace or the stove-top burner. In fact the average residential gas bill received from Southern California Gas Co. in the first half of this year will be lower than in 1984.
Today is when the other shoe drops from Congress’ passage in 1978 of the Natural Gas Act. The last controls will be removed from domestic gas discovered since April 20, 1977. Controlson gas found before then will remain in place until the old gas is used up- unless Congress should decide to lift those restrictions through new legislation.
Decontrol certainly hasn’t been painless. Prices paid by Southern California Gas Co. to its suppliers have nearly tripled since 1978, from $1.40 to nearly $4 per thousand cubic feet. But there will not be the instant and drastic jump in prices today that many hads forecast back during the monumental natural-gas debate in Congress in 1978.
This is due in part to the fact that Southern California still receives substantial supplies of gas frozen at old gas price levels. Also, California benifits from recent price cuts in gas imported from Canada. Other parts of the country are not so fortunate, and are locked into contracts of considerably more expensive gas.
A major goal of the 1978 act was to price gas at a more realistic level-- specifically, at the equivalent price of the fuel most likely to be used if there were no gas (that is, oil). In the wake of the 1979-80 oil shortage it appeared that the gas law would turn out to be a disaster for consumers as petroleum prices soared and gas prices threatened to follow. Those prices were tempered considerably by the worldwide recession, falling oil prices and conservation in gas use. By 1982, consumption of natural gas for space heating in homes had declined 19%.
Gas shortages turned into surpluses. Some producers who tried to charge more than the market would bear were forced to renegotiate contracts. And, as the Carter Administration had argued, partial decontrol did result in more gas drilling and production. New discoveries in the past few years have stemmed, temporarily at least, the depletion of domestric gas reserves.
The Natural Gas Policy Act worked, a spokesman for the American Gas Assn. observed the other day. If it worked, then why not decontrol the old gas, too, as the Reagan Administration has proposed? Consumer groups have contended that total decontrol would saddle residential users with heavy price shocks while providing producers with a massive windfall.
Gas producers say that sensible legislation would open new industrial markets, lessening the pressure to increase prices on residential users. That sounds fine. But if gas prices go too high, or if there are shortages, most industries can quickly convert their boilers to burn oil. Residential customers cannot, short of buying a new furnace.
The producers also have argued that decontrol is needed to encourage more domestic exploration and drilling. Since all new gas discovered after today will be decontrolled, that argument is lost. Decontrol can be beneficial, however, if it halts the practice of holding back the distribution of old gas in order to sell newly found gas at higher prices. Further decontrol will, and should, get a serious look during the new session of Congress. But so should additional efforts to encourage conservation, to develop alternative energy supplies and to protect residential gas users from inequitable fallout of the industry’s rush to end the inconvenience of “market disorder.”
