RENEE MONTAGNE, host:
Today's business segment focuses on Hurricane Katrina's impact on energy prices. The possibility that crude oil will be in short supply from Hurricane Katrina has pushed up gasoline prices. But Americans could soon see higher prices for more than just gasoline. Natural gas piped from the Gulf Coast provides heat and cooking fuel for tens of millions of Americans and power plants are increasingly using natural gas to generate electricity. To find out what impact Katrina is having on the price of natural gas, we called Mike Zenker in Oakland, California. He's a specialist in natural gas with Cambridge Energy Research Associates.
And good morning.
Mr. MIKE ZENKER (Cambridge Energy Research Associates): Good morning, Renee. It's a pleasure joining you.
MONTAGNE: What impact is Katrina having on natural gas production?
Mr. ZENKER: Well, much like the gasoline market that you referred to, natural gas markets have been quite tight in North America as well. Hurricane Katrina comes just after a strong demand in the summer for electricity due to hotter than normal weather. And now we've had this big supply shock. So it's coming on top of a very strong demand shock.
MONTAGNE: Well, do you have a figure or an estimate of how high we might see natural gas prices go and also for how long?
Mr. ZENKER: The market was quite worried about the risk of a strong hurricane like Katrina and it was already pricing some of that into prices. We've seen prices double over the last couple of years and then with Hurricane Katrina prices have doubled yet again. Currently, 10 percent of natural gas production is out in the United States and if that prolongs, we should see prices stay at these elevated levels, again staying above double.
MONTAGNE: Why had the prices gone up so much before Katrina hit?
Mr. ZENKER: The US has had a difficult time keeping pace with demand. As a result, demands been outstripping supply and prices playing this unfortunate but necessary role in rationing supply out there. And we're going to be in that environment until 2008 when new imports of natural gas from overseas help rebalance the market.
MONTAGNE: Is the US relying too heavily on natural gas to meet our energy needs?
Mr. ZENKER: Well, there was a very deliberate turn to natural gas. It had been relatively inexpensive and certainly is much more environmentally friendly than some of the alternatives, at least it was perceived that way. And so there was a very strong embrace of natural gas, particularly in the power sector with better than 90 percent of the large round of new power plants constructed over the last five years turning to natural gas. So very much an environmentally conscious approach to that fuel.
MONTAGNE: Mike Zenker is a senior director at Cambridge Energy Research Associates speaking from Oakland, California.
Thanks very much.
Mr. ZENKER: My pleasure.
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