Sen. Orrin G. Hatch (R-UT), chairman of the Senate Judiciary Committee, said Friday he plans to hold hearings to determine if the latest run-up in natural gas prices is the “product of collusive pricing or other unlawful activity.”
A spokeswoman for Hatch said the hearings would be held in 2004, but she could not say when. The Senate Energy and Natural Resources Committee also was asked Friday to probe the run-up in gas prices.
The Hatch announcement followed a plea by chemical maker Huntsman LLC earlier in the week for Congress to probe the surge in gas prices led by Nymex gas futures trading. The Salt Lake City, UT-based company alleged the latest price spike was the result of “greed and, very possibly, dishonesty” of traders (see NGI’s Gas Daily Price Index, Dec. 11).
U.S. gas consumers were buffeted by high gas prices last winter, Hatch noted. “Now, we have experienced another 50% increase in just the last week in some areas of the country. Frankly, I don’t understand how market forces can cause a 50% jump in gas prices in one week, especially considering that we have a near record amount of gas in storage and a near record number of rigs finding more supplies.”
NGI estimates that Nymex gas futures prices have risen 63% in the last six weeks, closing at $7.22/Mcf on Friday for gas to be delivered in January. Large short positions held by non-commercial traders, plus a sudden change in the weather forecasts for the heavily populated eastern and midwestern states have been blamed by some for the price run-up.
“Natural gas is so critical to U.S. consumers and the economy that if someone has been manipulating this market, they should go to jail,” said the Utah lawmaker. “I feel we must determine once and for all if these price surges are the result of market forces or if there continues to be price manipulation.”
Sen. Harry Reid (D-NV) called on the Senate Energy Committee to examine the volatility of the gas markets and the elevated price levels. “Clearly the onset of winter, increased manufacturing, and the weak dollar can apply upward pressure to the market, but this market does not appear to be reacting to the fundamentals of supply and demand,” he said in a letter to Chairman Pete Domenici (R-NM) and Sen. Jeff Bingaman, the ranking Democrat on the panel.
“I believe it is important for the committee to identify the reasons why natural gas prices have increased by $2 to $3 per thousand cubic feet in the last few weeks,” Reid noted.
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