By Myrna Trauntvein
Times-News Correspondent
There are many pressures affecting the cost of wholesale
natural gas.
Tony Ferguson, Electric and Gas Departments
Superintendent, presented the city council with five reasons
the cost of the natural fuel has continued to increase.
"These factors affect the cost of natural gas purchased
by Nephi City on a wholesale basis," said Ferguson.
Aside from those factors, said Ferguson, December was a
much colder month than was November. The cold outdoor
temperatures did mean that residents attempting to keep
their homes at the same heat level they had been at in
November would pay more. It would take more fuel to achieve
that comfort zone.
However, there are many other factors affecting the
price, said Ferguson.
"We have lived in an area where there has been a lot of
natural gas fuel and there has been no place else for that
fuel to go," he said. "Now increase pipeline capacity out of
the region has meant that the gas prices for our region have
increased."
The gas, he explained, is now shipped out of the region
and out of state.
"We are used to the lowest gas prices in the nation and
now we are closer to what the rest of the nation pays," he
said.
Nephi City Council members and the staff at city hall
have been getting numerous phone calls from citizens
concerned about the high cost of heating homes using the
city-owned natural gas fuel delivery system.
However, we are still fortunate that natural gas fuel
prices are lower than what many others in the United States
pay for the fuel.
Ferguson said that comparing the cost of four types of
home heating fuels, natural gas still was the least
expensive.
Natural gas costs $1.10 per therm which provides 100,000
BTUs for that $1.10.
Heating oil costs $1.79 per gallon which translates into
$1.285 per 100,000 BTUs.
Propane costs $1.45 per gallon and means that the user
pays $1.56 per 100,000 BTUs.
Electricity costs $0.05 per kwh. That translates into a
cost of $1.46 per 100,000 BTUs.
"Concerns at the national level over diminishing supplies
puts pressure on the market," said Ferguson.
That concern, thereby, means that the cost of the natural
gas is affected. The fear factor raises prices for the
fuel.
"The large increase in the cost of crude oil creates a
volatile market," said Ferguson.
Whenever crude oil prices move and fluctuate the way they
are currently doing, the market is affected and the price of
fuels, such as natural gas, increase. Traders hold firm on
crude oil prices in such a market.
U.S. oil prices were up 14 cents to $47.24 a barrel on
Friday, building on a dollar and a half of gains the
previous day triggered by revisions to the International
Energy Agency's supply and demand forecasts, which pointed
to a tighter market in 2005 than previously thought.
Ferguson said the price had been up to $50 a barrel and
was now at the $47.24 mark.
The IEA, adviser on energy policy to industrialized
nations, said the pace of oil supply expansion outside of
the OPEC cartel this year would be slower than previously
thought, and upped its forecast for demand.
Disappointing supply growth, particularly from number two
producer Russia, has been compounded by the pace of
incremental consumption, which last year grew at the fastest
rate in a generation to fuel a 34 percent price rally.
Traders continued to digest a report from the
Organization of the Petroleum Exporting Countries raising
its forecast for 2005 global oil demand growth to 2.11
percent from the previous estimate of 2.0 percent.
In spite of the strong forecast, OPEC continues to make
it clear that it could reduce its production at its next
meeting on March 16 in Isfahan, Iran.
Historically, said Ferguson, the demand for natural gas
decreased in the summer. That is no longer the case.
"New natural gas fired power generation facilities
further tip the scales in the balance of supply and demand,"
said Ferguson. "Those power plants are flattening the
demand."
There is no longer a curve with use higher in the winter
and lower in the summer. Not only power generation itself
but the demand for air conditioning has meant the market is
more level.
"Those are the main reasons the price of natural gas is
higher," said Ferguson. "There is no sign in the near future
of those backing off."
"The better news us that natural gas fuel is still
competitive," he said. "These are the current prices and so
natural gas is still the best value."
Chad Brough, mayor, asked if it was possible to tap into
some of the big lines going through Juab County and thus
obtain a better fuel price.
"We are tapped into Questar Interstate Pipeline," said
Ferguson. "So far, Questar is the less expensive line
(between Kern River and Questar) and provides the best
price."
At some time in the future, he said, it may make economic
sense to tap into Kern River Pipeline, but that was not the
case at present. In addition to taps being costly, the line
was still more expensive to purchase fuel through than was
Questar.
The payoff for the natural gas system for Nephi and other
member cities is still a few years away. The payoff of the
natural gas delivery system is scheduled for 2011.
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