Remember the Energy Crisis?

N E W   Y O R K, Aug. 24, 2001 -- Remember the energy crisis?

In his first few months in office, President Bush seemed preoccupied with the supposed power shortage in the United States, using it as a rationale for a string of high-profile and controversial decisions.

Among the most prominent administration moves: the reversal of Bush's campaign pledge to regulate carbon dioxide emissions from power plants; rejection of the Kyoto treaty intended to combat global warming by reducing greenhouse gases; a proposal to drill in Alaska's Arctic National Wildlife Refuge; encouraging new nuclear power plants; and proposing to eliminate "overly burdensome" energy production and delivery regulations.

But three months after Bush and Vice President Dick Cheney released the administration's broad energy report in May and a couple weeks before Congress starts its new session, the energy supply situation in the United States has shifted. The country is further away from crisis territory — if it were ever there in the first place.

Natural Gas Prices Lower, Oil Remaining the Same

For instance, according to a report released by the Department of Energy earlier this month, U.S. natural gas prices figure to be 30 percent lower in the third quarter this year than in 2000 — and heating bills, starting in the fall, could be 40 percent lower.

"If these projections are correct, gas consumers can expect to see considerably smaller bills this winter," states the DOE's forecast. About 30 percent of the nation's electric power plants are fired by natural gas, meaning the reduced costs could be passed along to consumers.

"We'll almost surely enter the winter season with more gas in storage than we did last year," says Chris McGill, managing director of policy analysis for the American Gas Association (AGA), an industry group in Washington.

The outlook is less certain when it comes to the U.S. oil supply. First, the good news: OPEC's prices have been steady in recent months, averaging around $24 per barrel. Now the bad: On July 25, the Organization of the Petroleum Exporting Countries decided to cut production by a million barrels a day, starting Sept. 1. Additionally, domestic reserves have declined since July. Those factors could raise prices a little, although no one is expecting them to get much worse.

"There will likely be no dramatic increase, no price explosion, unless something unusual happens," says John Lichtblau of the Petroleum Industry Research Foundation in New York.

Good News About Gasoline

Oil prices also strongly influence the price of gasoline — but even here the DOE says consumers should not worry about sticker shock at the pump. While prices soared in the spring to $2 per gallon in some places, they have since dropped sharply.

In fact, the DOE report says "continued improvement in gasoline supply could lead to further erosion of prices over the remainder of the year." Even if prices hold steady, predicts the DOE, gasoline will average $1.40 per gallon for the third quarter of the year — a solid 11 cents per gallon lower than what customers were paying at the pump a year ago at the same time.

"We could see in an increase in crude oil prices, and on that basis gasoline prices could go up," concedes Lichtblau. But he forecasts limited prices hikes at most.

Supply and Demand Even Out

So why have prices stabilized? Industry observers say the fluctuations are essentially due to the normal cycle of supply and demand.

Lower natural gas prices in the 1990s led to less exploration by energy companies and a smaller supply. As national demand increased in recent years, prices soared, spurring increased development and production. In turn, that larger supply has helped lower consumer costs.

"There is a strong increase in gas demand, but we threw a ton of money at the producers and they put some of that money to work and here we are," says Ed Krapels of Energy Security Analysis in Massachusetts.

As a recent AGA report states: "[R]ecord numbers of natural gas rigs are actively drilling, gas well completions are expected to exceed last year's levels and additional supplies of natural gas will be imported from Canada."

The energy situation has even improved in California, where rolling blackouts caused a political storm earlier this year. The state hasn't seen a blackout since May and electricity use has dropped significantly.

Californians Conserving: Energy Use Drops in the Golden State

Political Power Plays Still Possible

It won't be clear until Congress reconvenes in September, however, what effect the country's improved power situation will have on the political debate over energy.

California may not longer be a political hot potato, but the Bush-backed energy bill, titled the Securing America's Future Energy Act of 2001, will be taken up by the Senate, probably in September. Among other provisions, the legislation would over provide $30 billion in tax benefits for energy companies and allow ANWR drilling.

Even McGill, representing the gas industry, does not think last winter's problems constituted a national energy crisis — although he is glad they've kept the issue in the public eye.

"The convergence of all those things is unique," says McGill. "But it's [sending] a flare up. And I think that's good."