Oil, Gas Price Hikes to Boost Winter Heating Bills 30% or More in Southland
Customers of Southern California Gas and San Diego Gas & Electric can expect an increase in gas bills of at least 30% this winter, the latest sign that surging energy commodities prices are translating quickly into steeper bills for consumers.
That estimate came Wednesday as natural gas futures hit another all-time high and crude oil prices spurted to their highest level in 10 years.
With the markets agitated, the U.S. Energy Department said Wednesday that home heating fuel costs to consumers could leap 20% to 40% this winter while residential natural gas costs could jump 25%.
A typical winter residential bill for Southern California Gas customers is projected to rise to $72 a month from last winter’s $54, while a typical bill for SDG&E; customers is projected to hit $58 a month compared to $44, said Doug Kline, spokesman for Sempra Energy, the San Diego parent of the two utilities.
That projection is based on the doubling of wholesale natural gas prices in the last year, Kline said.
In New York, natural gas futures surged above $5 per million British thermal units for the first time ever after an industry report signaled that U.S. supplies may be rising too slowly to meet peak cold-weather demand.
Record and near-record natural gas prices have contributed to sharply higher wholesale costs of electricity--given the increasing use of natural gas to generate power--and now the expectations of higher winter gas bills.
Elsewhere, the price of crude oil and the resulting spikes this year in retail gasoline prices continue to worry U.S. energy officials.
Speaking in advance of an OPEC meeting this weekend, Energy Secretary Bill Richardson said the U.S. is seeking a stable price for oil of $20 to $25 per barrel and that prices of $34 are “unacceptably high.”
Near-term crude oil futures in New York gained $1.07, or 3.2%, to $34.90 a barrel Wednesday, the highest closing price since November 1990, before the outbreak of the Persian Gulf War.
The record was $41.15 a barrel on Oct. 10, 1990. Adjusted for inflation, that price is equivalent to $53.66 in 1999 dollars.
A decade high also was set Wednesday in London, where October Brent crude from the North Sea rose $1.30 to $34.28 a barrel.
“If this trend continues, there’s nothing to stop this rally,” John Kilduff, senior vice president of energy risk management for Fimat USA Inc., told Associated Press.
Ministers of the Organization of Petroleum Exporting Countries are to meet Sunday in Vienna to consider a third output boost for the year but are expected to approve no more than a 500,000-barrel-a-day increase. The cartel’s two previous efforts failed to stem the market’s advance, and oil prices have gained by one-third this year.
“To put a dagger in the heart of this rally, we’re going to need at least a million barrels a day, if not 1.5 million,” Kilduff said. “And chances of that are pretty slim.”
Global daily consumption is about 76 million barrels.
Phil Flynn, an energy analyst for Alaron Trading in Chicago, said the latest surge in prices follows reports that OPEC had actually produced at least half a million barrels a day more than the cartel’s official levels this summer.
If those numbers are correct, Flynn told AP, “we could be on a rocket ship that just isn’t ready to give up yet,” with prices quickly heading to $40 a barrel.
“Relative to any point in the last 20 years, I have never seen supply and demand as tight as it is today,” said Roger Plank, chief financial officer at Apache Corp., a Houston-based energy company.
In Washington, White House spokesman P.J. Crowley said the Clinton administration has “made clear to OPEC that we think there needs to be a balance, and it is a balance that serves the interests of both producing countries and consuming countries, so that we can see oil at a fair price, and . . . able to meet the global demand.”
Uneasiness over low supplies led to speculation that figures due out late Wednesday from the American Petroleum Institute would show only a small increase in U.S. stockpiles. As it turned out, the report showed a bigger-than-expected increase of 3.13 million barrels in U.S. crude inventories, to 289 million barrels.
But the rest of the energy supply picture was mixed, causing crude prices to rise past $35 in after-hours electronic trading.
The Energy Department separately projected that growing demand, especially in Asia, will keep world inventories low through next year, leaving oil markets vulnerable to supply disruptions.
Saudi Arabia’s Crown Prince Abdullah said Wednesday that consuming nations were partially responsible for high oil prices.
“I would like also to note the important role which the consuming countries should play,” he said in remarks released by the Saudi Press Agency.
“Their domestic taxes on oil constitute a heavy burden on consumers, and they should reconsider the rate of those taxes.”
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Associated Press, Bloomberg and Reuters were used in compiling this report.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
How High Can It Go?
Crude oil futures prices on Wednesday reached their highest level in 10 years, as fears of tight supplies continue to grip the market.
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Quarterly closes and latest for near-term crude oil futures in New York, per barrel
Wednesday: $34.90 per barrel
Source: Bloomberg News
