NGI The Weekly Gas Market Report
House Judiciary Committee Chairman Henry J. Hyde (R-IL), whothis summer asked the Federal Trade Commission to investigatepotential price gouging in the gasoline market, has now called onthe agency to investigate whether collusion by producers may havetriggered the escalation in natural gas prices.
In a letter last Tuesday to FTC Chairman Robert Pitofsky, Hydeurged the agency to specifically investigate whether gas producersmay have illegally colluded to create the current shortage innatural gas supply in order to drive up prices for the fuel.
“The press reports indicate that last year when prices werelower, producers cut their production. That production cut has ledto the current shortage with corresponding higher prices. Suchproduction cuts could be a legitimate response to market forces. Onthe other hand, if they were done collusively, they could violatethe antitrust laws,” Hyde wrote in his Oct. 10 letter.
“I am making no accusations because I do not know all therelevant facts. However, I do believe the situation calls for somereview,” he said, urging the FTC to report its findings andrecommendations “as promptly as possible” to the JudiciaryCommittee. “Consumers need to know whether or not producers andutility companies deliberately diminished reserves of natural gasin order to drive the price up,” Hyde said in a prepared statement.
Gas producers believe Hyde is on a fishing expedition. “Thisclearly has more political overtones than any merit. It doesn’tlook by the letter [to the FTC] that Hyde has any concreteevidence. But given the fact that gas prices are high, he’sprobably looking for political cover from his constituents,” said aproducer source.
The Natural Gas Supply Association (NGSA), which representsmajor producers, has been in contact with both the House JudiciaryCommittee and the FTC about the matter. “This association will beglad to respond to any questions the committee has of us,” saidNGSA Vice President John Sharp.
In requesting the probe, Hyde said “industry sources are hintingin press reports that natural gas used to heat millions of homesmay skyrocket as much as 90% in the month ahead…..I think we mustmove quickly to find out if and why that is true.”
In its “Winter Fuels Outlook: 2000-2001” issued earlier thismonth, however, the Energy Information Administration (EIA)projected a much more modest increase in residential gas prices inthe months ahead. It estimates delivered gas prices for residentialcustomers in the Midwest will rise on average by about 30% duringthis winter heating season. As a result, a typical Midwesthousehold is likely to pay about $240 more for natural gas thiswinter than it did last year, the Department of Energy (DOE) agencysaid. Hyde’s home state of Illinois is expected to be especiallyhard hit by the higher gas prices this winter.
Hyde recalled that gasoline prices fell 30% in the Chicago areaafter he requested an FTC probe of the market. He hopes the FTCinvestigation of natural gas prices will send an equally importantsignal to producers and utilities that federal regulators aremonitoring activity that might be considered anticompetitive.
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