Natural gas, gasoline prices heading down

Friday, Sept. 28, 2001 | 10:43 a.m.

SUN STAFF AND WIRE REPORTS

WASHINGTON -- Gasoline prices have dropped a nickel or more a gallon. The price of natural gas, once sky-high, is now so low producers are canceling orders for drilling rigs. And crude oil prices have taken a nosedive.

Amid the nation's economic woes, the energy crisis has faded, with abundant supplies, declining demand and prices that suddenly are lower than anyone had predicted just a few months ago.

The price drops are good news for consumers and, barring any unforeseen developments, analysts predict a winter of lower heating costs and plenty of fuel.

In Nevada, lower costs of fuel could offset a general rate increase sought by Southwest Gas Co., reduce the cost of gasoline at the pump through Thanksgiving and affect Nevada Power Co.'s bid for its first general rate increase in nine years.

With the war on terrorism now taking center stage in Congress and elsewhere, what once had been a rush to push through major energy legislation has slowed to a crawl. While the House has passed an energy bill focusing heavily on production and tax breaks for industry, leaders in the Senate no longer are certain a bill will be possible this year.

And there is growing consensus among energy analysts, government officials and economists that the Sept. 11 terror attacks will have no impact on the flow of energy supplies. By pushing the United States -- and possibly the world -- closer to recession, the attack, in fact, exacerbated the downward spiral of energy prices, analysts say.

Meeting in Vienna, Austria, the ministers from the Organization of the Petroleum Exporting Countries on Thursday reiterated their commitment to current production levels, fearful that any cuts would bring on worldwide recession.

In fact, energy experts say, OPEC countries actually are exceeding their official production levels by about 1.7 million barrels and that the cheating is likely to increase if prices tumble further as some producers try to make up lost revenue.

"The markets basically are saying that there's too much oil around," said Van Levy, an energy analyst for CIBC World Market in Houston.

Earlier this week the price of a barrel of crude oil plummeted by nearly $4 to below $22 a barrel, the biggest one-day decline since the Gulf War a decade ago. Prices on the New York exchange edged back up slightly, closing at $22.73 on Thursday with contracts for November delivery about the same.

Across the board, energy has become cheaper:

* Gasoline prices dropped about 5 cents on average nationwide over the past two weeks to an average of $1.48 a gallon because of weak demand and plenty of supply, the Energy Department said.

* Lisa Foster, a spokeswoman for Nevada's AAA office in Reno, said lower crude oil prices have resulted in a drop in the price of gasoline and a forecast for even lower prices by Thanksgiving.

Foster said the average price of gasoline at 60,000 stations surveyed nationwide was at $1.48 a gallon for regular unleaded fuel, down a penny from Thursday. In Nevada, were 500 stations are surveyed, the average price was $1.60 a gallon, down a penny from Thursday, and in Las Vegas, the average price was $1.52 a gallon, the same as it was Thursday.

AAA is projecting the nationwide average price to reach $1.40 a gallon by late November and Foster said supplies have not been affected by the terrorist attacks.

* Natural gas prices on the wholesale market have dropped below $2 per thousand cubic feet -- bringing prices back to where they were two years ago before the steep run-up that peaked at about $10 in some markets last winter.

Utilities used less natural gas than had been expected this summer for power production, adding to amounts in storage. And the economic slowdown has dramatically cut industrial demand.

With prospects for a near-term economic recovery dwindling, demand for natural gas is not expected to rebound until sometime next spring at the earliest, predicted Adam Sieminski, energy strategist for Deutsche Bank Alex.Brown.

In Southern Nevada, lower natural gas prices could save consumers money on their winter bills.

A Southwest Gas Corp. spokesman said today lower wholesale fuel costs to the company would be passed on to customers and those lower prices could offset all or some of a general rate increase the company filed for earlier this year.

Spokesman Roger Buehrer said today it's too early to tell how much gas prices would drop and whether it would offset the company's proposed 9.5 percent, $22.7 million general rate increase.

Development of supply and storage capabilities in the last year and favorable summer weather have contributed to the drop in prices that may affect Southwest Gas customers, he said.

Peggy Laramie, a spokeswoman for the American Gas Association, Washington, said the flow of the nation's natural gas supply shouldn't be affected in any way by the terrorist attacks on the East Coast Sept. 11.

* Officials with Nevada Power Co. were meeting today to formulate details of a general rate increase to be presented to the Public Utilities Commission on Monday. The primary electricity utility serving Southern Nevada announced plans for a rate increase, the first since 1993, in August.

Most of Nevada Power's power generation stations are fueled by natural gas, but it was unclear this morning how a decrease in natural gas prices would affect electricity rates.

* Heating oil prices have declined as well and could soften even more as winter approaches and refineries churn out more of the product instead of jet fuel. Demand for jet fuel has decline significantly because of the big hit on business that airlines have taken since the Sept. 11 suicide hijackings.

The Associated Press and the Sun's Richard N. Velotta contributed to this report.