The Cost of Natural Gas [was Re: The Cost of California Liberalism]

[Raymond D. Mereniuk]

auto58194 at hushmail.com wrote

> Sorry, such is the nature of free (and shared) markets.  If anything
> you should thank California; if they had been building more power
> plants, they'd be buying more natural gas and driving up your prices
> even more.

Actually if California had been building power plants in recent years 
we would not have this short term price issue.  If they had built a 
power plant they would have committed to a supplier of natural gas 
who would have arranged a supply (drill wells) and arranged 
delivery (build pipeline capacity).  The problem now is no one in 
California made commitments so the market did not build supply 
and delivery capacity. California consumers are now forced to 
purchase their requirements in a commodity market causing the 
current distortions.
 
> Besides, have your prices gone up beyond your acceptable level because
> of California, because of cold weather, because your neighbour replaced
> his oil burner with a gas furnace, or because Williams Company has
> been spending its money laying fiber optics instead of more gas
> pipelines?  

The consumer price for natural gas here is based on the delivery 
price at Sumas Washington which is a pipeline crossing into the 
USA and a major supply point to California.  The cost to heat my 
home will have more than doubled by January 1st.  The price I must 
pay is heavily influenced by demand in California.  It is always cold 
here and the furnace is even used in the summer.  There are more 
people in California than in all of Canada and most Canadians live 
on the other side of the continent.  This market is much too small to 
influence the price of natural gas.  

In the past natural gas prices were determined by the price of oil.  
When oil prices were low exploration companies had less capital 
available for exploration.  In general exploration companies only 
search for natural gas when they have delivery contracts.  Collection 
systems, pipelines, are only built when there is a market for the 
natural gas.  If natural gas power plants were built in California the 
gas would be available.  If oil prices had been higher in recent 
years exploration companies would have probably have attempted 
to build reserves of natural gas but chances are the delivery system 
would not be in place so there would still be a shortage.
 
> Natural gas is a great fuel source.  You, lots of Californians, and I
> made a good choice in deciding to use it.  Perhaps we need to
> reevaluate our decisions given the current situation, but blaming
> others for making the same decision we did doesn't make much sense.

Natural gas is a good choice but maybe not the best.  While natural 
gas is considered clean burning the emissions for even a smaller 
plant is measured in the thousands of tonnes per year.  There is 
some risk involved with pipelines, if they break there is always a fire 
if not an explosion.  There will now be significant political pressure 
to bring Alaskan natural gas to the California market, lots of issues 
here to keep the liberal tree huggers busy for years.  There are only 
two ways to get it to the market, pipeline or liquidify it and use a 
tanker.  I believe I would rather have nuclear power plant in my 
neighbourhood than a liquidified natural gas facility.

> Sure it can, you can just take yourself out of California's market. 
> Buy yourself a wood stove and petition your government to
> build/encourage more nuclear power plants.  (Hey, the bottom's fallen
> out of the nuclear fuel rod market and I doubt California's going to
> be responsible for price increases in that market any time soon.)

It would be nice if you could wave a magic wand and separate 
markets, but that cure would be probably worse than the disease.  
The current pricing issue is a short term one.  A few years of higher 
prices and the market will response with more supply and delivery 
capacity.  

I have done the wood stove thing and it is a bunch of work plus it is 
very hard on air quality.  Coal fired furnaces are less work but very 
hard on air quality.  

It would be nice if Californians took responsibility for their lifestyle, 
built the power plants in California and dealt with environmental 
issues themselves.  You have a choice, if you don't want power 
plants, don't use power.





Virtually


Raymond D. Mereniuk
Raymond at fbn.bc.ca
"Need Someone To Tell You What To Do?" 
FBN - The Consultants
http://www.fbn.bc.ca/consultg.html