Ferguson's Forecast: Why We Need to Get Serious About Fossil-Fuel Dependence

The big energy news this week has been the new record-high oil price that closed at $56.46/bbl on Wednesday. As I write this, the price is $56.70. The media are quick to point out that in current dollars, the inflation-adjusted record that occurred in 1980 was about $90/bbl. Nevertheless, current oil prices have spawned a new round of concern over global oil supply adequacy. Under the smoke screen provided by oil prices, natural gas prices also continue to climb, with the April NYMEX contract closing Wednesday at $7.22/MMBtu. The average price for contracts over the next 12 months, the so-called 12-month strip, closed at an impressive $7.73/MMBtu. The current energy price of oil is considerably higher at $9.74/ MMBtu. Thus, no one is going to switch fuels from gas to oil anytime soon. Congress, therefore, needs to stop fooling around with symbolic measures like the March 16 Senate decision to open the Arctic National Wildlife Refuge to oil drilling. It?s time to get serious about reducing the nation?s dependence on oil and gas. What we thought were high gas prices last year failed even to maintain production at previous levels. Average wellhead gas prices in 2004 were 51 cents higher than in 2003 (up 10 percent), but U.S. gas production fell anyway by 300 billion cubic feet (down 1.6 percent). Consumption remained essentially flat year to year. It will be interesting to see how today?s futures prices affect North American gas production and consumption this year. The market seems to be betting that production will fall again this year. Preliminary data indicate that is indeed the case. In related news, in last week?s Energy Circuit , I complained about a new data glitch at the Energy Information Administration. ?The data set that was published in the February MER showing the dramatic downward revisions is incorrect and was included by accident,? EIA said in response to my e-mail query. ?It had been produced mid-cycle to test a new publication system. The data to be published in the March issue of the MER will reflect the correct numbers of well completions and footage drilled.? That?s life in the EIA bureaucracy.

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Ferguson’s Forecast: Why We Need to Get Serious About Fossil-Fuel Dependence

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