NEW YORK (AP) - Natural gas prices have plunged
to stay competitive with oil, but some American households face rate
increases for gas and millions of others are receiving only a
portion of the savings being offered to industrial customers.
Prices that interstate pipelines and distribution companies pay
for uncontrolled natural gas on the open market have dropped as low
as $1.30 for each million British thermal units of energy. That is
down 46 percent from a year ago, to a level last seen in the 1970s.
The big winners are companies with the capability of switching
from natural gas to oil, giving them a major bargaining chip for
winning concessions from suppliers.
With oil at about $15 a barrel, the residual fuel oil needed by an
industrial user to produce 1 million Btus of energy costs about
Boeing Co., for instance, recently switched to residual oil from
natural gas at most boilers in two Seattle-area plants at a saving of
$1.70 for each million Btus. That could add up to $1.5 millionover
the next 12 months.
Boeing, which spent $28.6 million on natural gas last year,
prefers gas to oil even if it means spending as much as 80 cents more
for each 1 million Btus, spokesman Craig Martin said. But, he added,
with the current wide price spread favoring oil, ""there isn't much
reason for us to stay with natural gas.''
Consolidated Edison Co. of New York suspended natural gas
purchases for only one day earlier this year before gas suppliers
lowered prices. The utility, which has not had a rate increase in
more than three years, says typical residential electric bills in the
metropolitan New York area were 5.2 percent lower in April than a
year ago because of lower fuel costs.
To keep six electric utilities from switching to oil, Southern
California Gas Co. is charging the utilities less than the average
price it pays for gas. The utilities consume 39 percent of the
entire volume distributed by Southern California Gas.
At the same time Southern California Gas also has proposed raising
bills to millions of residential customers by an average of 11.7
percent, saying that if the company's big customer switched to oil,
residential rates could rise even higher.
In most areas, though, residential rates are falling.
""I don't think they're going to be raping residential
customers,'' David Fleischer, an analyst who follows the natural gas
industry for Prudential-Bache Securities Inc., said of gas
The natural gas industry, which has been beset by excess supplies
for much of the 1980s, faces a major battle to maintain its share of
the energy market following the collapse of oil prices from more than
$30 a barrel late last year to about half that now. The industry
already has seen U.S. demand for gas fall from 22 trillion cubic feet
in 1972-73 to about 17 trillion.
""With oil at $15 per barrel, no segment of the gas industry will
escape unscathed,'' analyst Marion Stewart said in a recent edition
of his Stewart Energy Outlook.
The average price pipelines pay gas producers has been falling 5
cents to 10 cents a month, and the decline will continue, the
American Gas Association predicts.
""We're in a literal dog fight for market with oil,'' said
Nicholas Bush, president of the Natural Gas Supply Association, an
organization of producers. ""Every indication is that this fight is
going to be intense this summer.''
Oil accounts for about 42 percent of the nation's energy
consumption, followed by natural gas, at 24 percent, with 47 million
metered customers. …