Don't Blame Arabs For
Natural Gas Price Shock
By Marcia Merry Baker
Executive Intelligence Review
Exclusive to
(EIRNS) - The natural gas shock is now hitting everywhere, from localities across the United States and Mexico, to India, on the other side of the world. In some places gas prices have jumped more than 300% in just the last six months.
But with natural gas (and related products-- propane, etc.), if you know anything at all about the geographic patterns of production, pipelines, trade and distribution, you can't pin false blame on Arab sheiks--as the media and government officials are now trying to do with oil. Almost all natural gas consumed in the United States is produced in North America.
The essential points about the natural gas crisis, which parallel the oil price crisis, are:
1) Speculation on deregulated "markets" is driving up the prices, from the "spot" market, to futures and derivatives of all kinds. The graph shows the soaring price on the spot market (for trading in short-term contracts); it's called the "Henry Hub" reference price, for a gas pipeline terminus in Louisiana, one of the top three gas-producing states, along with Texas and Oklahoma.
Among the biggest holders of derivatives (speculative futures contracts) are Goldman Sachs, Duke Power, and Enron, many of whose representatives testified to Congress Sept. 28 that they will brook no intervention in their "free market" of energy prices (see article, p. 2).
2) The big players in natural gas futures, and energy derivatives gambling of all kinds (oil, electricity, etc.), are the same giant companies that have come to dominate the actual physical supply lines of natural gas, from source, to transmission, to distribution.
This takeover process is part of the across-the-board commodities grab that has taken place during the 1990s, to the point of cartel control over all kinds of essentials, from food and agriculture products, to strategic minerals and industrial inputs.
- Blame the Bush/Gore Backers -
The political/financial interests involved are best described as "BAC"--British American Commonwealth--from the make-up of the funding, boards of directors, and corporate policies. In turn, these circles interconnect with {both the Bush and Gore} candidacies.
The largest donor by far to the Bush campaigns is Texas-based Enron, formed in 1985 as a merger of two natural gas companies, contributing over $550,000 to Bush family campaigns. All the companies are heavily behind the Bush and Gore "Clean Air" environmentalist campaign pushing natural gas.
The top four integrated natural gas companies (equivalent to the oil mega-majors Mobil-Exxon, BP-Amoco-Arco, etc.) in the United States, according to Standard and Poor's ratings, are Columbia Energy Group, Consolidated Natural Gas, Enron, and Questar. Likewise, the pipelines transporting the gas on this continent are in the hands of a select few companies: Coastal Corp., El Paso Energy Corp./DE, Sonat Inc., TransCanada Pipelines, and Williams Cos. Inc.
The graph on U.S. natural gas shows that production and consumption rose in tandem, up until the 1970s. Then began the deregulation process, and other instigated destabilizations of economic activity (floating currency exchange; Federal Reserve double-digit interest rates; deliberately provoked oil "shocks," Mideast strife). In 1978 the U.S. Natural Gas Policy Act was passed, beginning the deregulation of well-head prices (removing parity and stability), forcing out many independents. In 1990, President George Bush signed amendments to the Clean Air Act, blatantly in service of Texas energy and financial interests. (For particulars on the "Big Energy" interests behind Gore and Bush, see p. 8).
In recent years, the BAC cartel moved to bring online more imports of natural gas from Canada, under their control. This is shown on the graph. As U.S. consumption falls below production, the gap is made up almost entirely from Canada.
In November, a new 1,857-mile pipeline will open, from British Columbia to Chicago, a key part of the new geostrategic control of resources.
What is required is a reassertion of national interest by governments, and intervention into the worsening crisis, by stabilizing supplies and prices, and breaking up the commodities lockup.
- Crisis: United States -
Over 25% of the energy used in the United States comes from natural gas, and some 40% of that goes to industrial customers, including factories and electric power plants. The rest is for commercial and residential customers, including schools and hospitals.
The Department of Energy is estimating that natural gas prices this winter could rise to $8.59 per 1,000 cubic feet, which is more than $2 higher than a year ago, and about four times what it was two years ago. In the U.S. Midwest, where homes, industry, agriculture, and public facilities rely most heavily on natural gas, institutions are gearing up plans to try to deal with rapidly escalating natural gas prices, driven by the speculative frenzy in energy markets.
As an example of what localities are facing, it is reported that MidAmerican Energy has notified the Des Moines, Iowa school district that natural gas prices could increase 48% this winter. The school system's chief operations officer commented that they will have no choice but to pay this highway robbery, because "heating our schools is not optional." But since they have a pre-set budget, they face dipping into reserves, cutting programs, or eliminating jobs.
Hospitals and all other kinds of institutions are in the same situation. On Sept. 20, state governors met in Cleveland, Ohio, for a Natural Gas Summit.
- Crisis: Mexico -
In Mexico, the natural gas price hyperinflation is wreaking havoc. In the leading industrial state of Nuevo Leon, 500 companies may shut down. The 150% increase in the natural gas price this year has caused the Hylsa steel complex to suspend its mining activities in the states of Colima, Jalisco, and Michoacan, affecting the Cerro Nahuatl, El Encino, and Aquilas mines which supply it with ore.
In Monterrey, three reduction plants will also shut down, while the Puebla plant is operating at 50% capacity. More than 1,200 workers will be affected directly, and another 6,000 indirectly. The Canasintra industry association has warned that 250,000 workers could be laid off in the glass, ceramic, and steel industries this winter, because of high gas prices. _____
This article appears in New Federalist newsweekly, Oct. 9. A free copy of that issue, PLUS the Sept. 29 Executive Intelligence Review, which includes a dynamite 20 pages on "the third and final energy hoax," how the Federal Reserve and the BLS lie about consumer price inflation, and related matters, will be sent free to anyone who calls 1-888-EIR-3258 and says they "saw it on"
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