The Natural-Gas Solution; Congress Overlooks Energy Alternatives

Article excerpt


A conversation with neighbors recently about the high costs for energy, whether oil, gasoline or natural gas, prompted some digging and lots of questions that centered on a simple premise: Why are costs so high? This will be the central question for millions of Americans in the Northeast this winter, as well as those across the Great Lakes and the Western Plains. Sure, volatile energy markets, vagaries of Middle East politics, spot prices for crude, the falling dollar and many other factors play into the energy-cost equation.

But so too do politics and a failure of leadership in Congress to rise above partisan or special-interest whims to deal with the fundamentals of energy policy.

Consider natural-gas supplies: As more states push public utilities to burn cleaner fuels, natural-gas consumption has soared, which, in turn, has jacked up the price due to limited domestic supplies. Utilities generally pass these costs along to customers.

But other consumers of natural gas, including manufacturing and chemical companies, can only pass along so much in the free marketplace where cheaper imports generally are better sellers. One consequence of American firms having to buy American-produced natural gas at $14 p/MMBtu, which translates to about $7 per gallon of gasoline (compared to less than $4 virtually anywhere else in the world) has been a loss of more than 100,000 jobs in the chemical industries in just five years. Another consequence of state-sponsored overdemand vis-a-vis supply of natural gas is that farmers are paying 50 percent more for fertilizers - assuming they can get them. This leads to economic hardships that reduce tax revenues and boost federal and state expenditures. It also results in higher food prices.

When reviewing such data, some members of Congress were recently stupefied at the substantial economic impact of high natural-gas prices.

For example, byproducts from natural gas include siding used in homes and absorbent liners in diapers and shampoo ingredients. They also include lotions, toothpaste, laundry detergents, dishwashing liquids, milk and water jugs, and bottles and containers for products ranging from mustard to ketchup to honey to sour cream. Prescription and over-the-counter drugs also rely on components derived from natural gas such as the coating on pills.

Farmers have known and tried for years to scream about higher fertilizer costs, as have carpet and plywood and insulation manufacturers, to name but a few. Makers of tires, car parts, brake fluids, contact lenses and eyeglasses, not to mention printed-circuit-board dealers, also have become aware of this, as costs keep climbing but profits do not. This has occurred because they have held down prices due to foreign competitors who can make the same goods at far less cost. …