Continuing

The current high cost of energy, particularly natural gas, andthe continuing energy crisis in California prompted President BushMonday to retract an earlier promise to press for restrictions incarbon dioxide (CO2) emissions from power generation. Curbing CO2emissions would boost demand for natural gas at the expense ofother dirtier fuels, particularly coal and oil.

Continuing weakness in the gas market due to a sharp drop indemand prompted Lehman Brothers to lower its gas price forecastsfor the first quarter and for the years 2001 and 2002. However, itmaintained its gas price forecast for 2003 and raised its crude oilprice forecasts.

Indicative of the continuing stalemate on what to do aboutCalifornia’s chronic power market woes, Sempra Energy’s CEO and thechairman of the Federal Energy Regulatory Commission pushed forsharply different actions at an energy executive forum, “PowerCrisis in the West,” hosted by Massachusetts-based Xenergy.

Energy stocks took a pounding yesterday mainly in reaction tocontinuing uncertainty over the financial health of California’stwo largest utilities, Southern California Edison and Pacific Gasand Electric, which got a weak short-term prescription by stateregulators (see related story this issue).

With electricity woes in California continuing to grow inseverity, Calpine Corp. is in the process of easing the strain inthe long term as it considers plans to develop and operate an 1,100MW natural gas-fired electric generating facility in AlamedaCounty, CA.

Astronomical gas prices could push another 3.5 Bcf/d of gasdemand out of the market next year, according to a research note byCambridge Energy Research Associates. While the high gas-usemarkets, such as fertilizer and methanol producers, already havecurtailed production significantly, CERA said it expects four moremajor demand responses: another wave of fuel switching to residualfuel oil by industrial boilers, a surge of investment to increasefuel switching capability, some potential switching to distillateoil and more industrial plant shutdowns.

The fundamental of having snow and/or frigid temperaturescontinuing to pervade most markets was still around, but cashtraders must have been looking at hints that at least a moderatethaw might begin in several areas today. They again sent priceslower by about a dollar or more Wednesday in most cases.

Astronomical gas prices could push another 3.5 Bcf/d of gasdemand out of the market next year, according to a research note byCambridge Energy Research Associates yesterday. While the highgas-use markets, such as fertilizer and methanol producers, alreadyhave curtailed production significantly, CERA said it expects fourmore major demand responses: another wave of fuel switching toresidual fuel oil by industrial boilers, a surge of investment toincrease fuel switching capability, some potential switching todistillate oil and more industrial plant shutdowns.

With electricity woes in California continuing to grow inseverity, Calpine Corp. is in the process of easing the strain inthe long term as it considers plans to develop and operate an 1,100MW natural gas-fired electric generating facility in AlamedaCounty, CA.