WASHINGTON -- The government's emergency oil stocks will not be used to dampen soaring energy prices, Energy Secretary Spencer Abraham told senators Tuesday, but the Bush administration will move quickly to draw on the reserves if severe supply shortages appear.
The emergency stocks "should not be used to address price fluctuations," Abraham told senators, worried about soaring fuel costs.
"We will and we can act quickly to use the Strategic Petroleum Reserve ... to offset any severe disruptions if it's needed," Abraham told a Senate hearing. He said, however, the 600 million barrels held in the reserve on the Louisiana-Texas coast would be used only "to provide energy security."
"We do not believe it should be used to address price fluctuations," Abraham said.
Appeals for government intervention grew louder Tuesday as spot prices of natural gas briefly soared to nearly double the record high of two years ago, in the midst of the California energy crisis, and the price of gasoline lingered at over $2 a gallon in many parts of the country. Heating oil supplies remained tight and prices high.
"People are being pinched like never before" by soaring gasoline and other energy prices, Sen. Ron Wyden, D-Ore., told Abraham. Wyden said consumers "are getting hosed because they're not getting any protection."
At a separate hearing later Tuesday, senators expressed dismay about the sudden spike in the price of natural gas, which is used widely across much of the country for heating and for producing electric power.
Natural gas prices have increased by nearly 40 percent since the first of the year and jumped dramatically this week. Contracts for gas delivery in March closed Tuesday at $9.58 per 1,000 cubic feet, an increase of almost $3 from last week.
Spot prices took an even sharper jump.
Guy Caruso, head of the Energy Information Administration, told senators the spot price of natural gas at the Henry Hub, a benchmark delivery point in Louisiana, soared briefly $18 and $20 Tuesday before dropping back to $12.20, the same as on Monday. The spot price two years ago, in the midst of California's energy crisis, reached a high of about $10 per thousand cubic feet.
Only a small fraction of the natural gas sold, between 5 percent and 10 percent, is bought on the spot market. Most gas is contracted in advance at lower rates. Still, the run-up caught energy analysts and industry executives by surprise.
"A lot of this is people speculating," Keith Rattie, president of Questar Corp., a natural gas producer based in Salt Lake City, told the senators. He added that much of the speculation is being triggered by higher than expected demand and low natural gas inventories in storage.
The EIA, the statistical arm of the Energy Department, reported last week only 1,168 billion cubic feet of natural gas were in storage as of mid-February, 27 percent lower than the five-year average at this time and 43 percent below what was in storage a year ago.
On the Net: Energy Information Administration: http://www.eia.doe.gov/