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Weather Warms Up, Gas Prices Cool Off

Posted on: Wednesday, 12 April 2006, 09:01 CDT

By Adam Wilmoth, The Daily Oklahoman

Apr. 12--Heating cost continues months-long slide

Natural gas prices continued to fall in March, providing relief to consumers saddled with paying more for gasoline at the pump.

"It would be wonderful if they could lower prices further," said Verda Kimbrel, who describes herself as retired and on Social Security. "With everything else we have hitting us, it would help some."

Kimbrel said she and her husband Ed cut back on living expenses during the coldest part of winter to pay for their heating bill.

"We doubled up with three and four layers of clothing and didn't turn the gas on, and we still had over $100 a month on home heating," she said.

Lower than anticipated natural gas prices have provided savings for the state's natural gas and electric utility customers.

Oklahoma utilities are not allowed to profit on the fuel they use to generate electricity or deliver to customers' homes. The companies pass their natural gas purchase costs on to customers in the form of a fuel cost adjustment charge.

So as natural gas prices continue to fall, customers will see savings on their utility bills.

Oklahoma Natural Gas during the past three months has reduced its fuel cost adjustment from more than $12 per dekatherm in January to $8.66 in April.

A dekatherm is the heat energy released from burning roughly 1,000 cubic feet of natural gas.

Centerpoint Energy recently lowered its fuel cost to $7.38 per thousand cubic feet, down from $9.62 in November.

Some Oklahoma electricity customers also are seeing savings. Public Service Co. of Oklahoma last week said its fuel cost changed from about 2.5 cents per kilowatt-hour to about 1.5 cents per kilowatt-hour.

Oklahoma Gas and Electric Co. spokesman Tim Hartley said OG&E has been charging about 1.7 cents per kilowatt hour and has no plans to change the price. The state's largest electric utility is less affected by natural gas rates because most of its power is generated by coal-fired plants, Hartley said.

The utility price reductions have been fueled by the tumbling price of natural gas, which settled at nearly $6.91 per thousand cubic feet Tuesday on the New York Mercantile Exchange. The price was up almost 3 cents on the day, but down more than 55 percent from more than $15 in November.

The price drop has been attributed largely to mild winter temperatures, which have dramatically reduced the country's demand for natural gas. A record nearly 1.7 trillion cubic feet of natural gas remain in storage as of March 31, according to the U.S. Energy Information Agency. The level is about 36 percent higher than about 1.2 trillion in storage one year ago.

While falling prices are good for consumers, the trend also has eaten away at Oklahoma natural gas producers' profits. Bruce Bell, however, said prices still are at comfortable levels for the state's natural gas industry.

The average price Oklahoma natural gas producers receive -- known as the Western Oklahoma Natural Gas Price Index -- slipped to $5.79 per thousand cubic feet for April delivery, down from $6.22 in March. The price has fallen steadily from a high of $10.80 in November.

"Some specialized drilling activity requires high prices before the effort is profitable," said Bell, chairman of the Mid-Continent Oil and Gas Association of Oklahoma. "But at $5, $6 or $7, most of the projects we're involved in statewide and nationwide are still going to be viable projects. I would not expect to see a reduction in the amount of spending."

If prices fall to about $3.50, however, many proposed drilling projects would be halted, Bell said.

But most observers have said prices are unlikely to fall much farther than current levels. Bell and Oklahoma City natural gas marketer Tony Say both projected prices to range between $5 and $8 per thousand cubic feet throughout the summer and fall -- barring any significant hurricane damage, other unusual weather or political disruptions.

Weather, however, probably will continue to be the biggest factor in determining natural gas prices, they said.

"If we have an extremely warm summer, we can see the price inch back up," said Say, president of Oklahoma City's Clearwater Enterprises Inc. "And if there are more hurricanes, watch out."

Meanwhile, the Kimbrels have a new worry.

Soaring gasoline prices are putting a pinch on their budget, forcing them to limit trips to western Arkansas to visit a sick relative, they said.

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Source: The Daily Oklahoman

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