An initial review undertaken by the Federal Energy Regulatory Commission seems to suggest the spike in natural gas prices in the Northeast and elsewhere last week was “fundamentally driven” by market forces, rather than abusive practices, said the head of the agency’s Office of Market Oversight and Investigations (OMOI) last Wednesday.

“We were following the developments” in the marketplace throughout the week as prices climbed to determine whether “we were comfortable we could explain what was going on,” OMOI’s William Hederman told NGI. The staggering price increases appear to have been tied to a mix of influences coming together at once — low storage delivery, tightness of supply, overreaction on the part of gas buyers and bad weather, he said.

Despite the agency’s apparent belief the price hikes were market-driven, Hederman said the Commission was preparing data requests to be sent to gas industry participants so it can “get a better sense of what was going on.” He was unable to say who would receive the data requests, or when they would be sent out by FERC.

Senate Minority Leader Tom Daschle (D-SD) wants more answers about high gas prices as well. Last week, he called on the Department of Energy (DOE) to begin a federal investigation into the causes for the recent gas price spikes across the nation and particularly in his home state of South Dakota.

“Natural gas prices have reached an all-time high, with reports in South Dakota of rates doubling overnight. Some constituents tell me they are now paying more to heat their homes than to feed their families. Others are forced to cut back on necessities in order to pay their heating bills,” Daschle wrote to DOE Secretary Spencer Abraham on Thursday. A copy of Daschle’s letter was sent to FERC Chairman Pat Wood.

“The high cost of natural gas is having a devastating effect on South Dakota’s economy, and we need to determine the cause of these price spikes. I therefore urge you to begin an investigation into this matter as soon as possible,” he said.

“This is a serious problem that affects South Dakota’s already weakened economy and threatens the livelihoods of working families, farmers and small business people, all of whom are struggling to pay these rising bills.”

The Low-Income Home Energy Assistance Program is one way to help the elderly and low-income families with the rising gas costs, he said, “but the program needs substantially more funding to be effective.”

At the White House on Friday, spokesman Ari Fleischer reiterated President Bush’s position that Congress should make comprehensive energy legislation a priority this session to put an end to the “repeatable, predictable pattern” of yo-yoing gas and oil prices and supplies that the nation is seeing this winter.

“The cost of energy…and the availability of energy remain very important issues for both the president and the Congress,” he told reporters. “There [has] been a confluence of factors involving both the cold weather and a shortage of supply that [has] led to an increase in the prices, which concerns the president greatly. There is a cyclical nature to some of this.”

Issues involving energy supplies, prices and conservation have become “predictable debates in Washington, as prices go up in the winter, and then they come down, and…go back up in the summer,” Fleischer said. President Bush “thinks that people came to Washington to think long-term, and to act long-term, and to get ahead of [this energy] cycle.”

At the other end of Pennsylvania Avenue, Senate Energy Committee Chairman Pete Domenici (R-NM) last week said allegations of price gouging in response to the steep rise in wholesale natural gas prices were based on “frustration, not facts.” He noted he was “extremely skeptical that there is any truth” to claims of pricing abuse.

“We’ve been down this road before. We were here two years ago. Prices were just as high, driven by rising demand and tight supply,” Domenici said, citing the single-day rise of 38% in wholesale gas prices last week. “Now…we face the same scenario. In the interim, domestic production of natural gas has declined even further.”

Insufficient energy production “is our core problem,” while “allegations and rumors are just a temporary distraction,” the chairman said in a press statement. “If we want to stabilize prices now and in the future, we must produce more of our own natural gas. If we don’t, we will visit this scenario again and again,” as the crises in supply and price “will only get worse.”

Domenici agreed with industry experts who testified before the Senate Energy Committee last Tuesday that “oil and gas supplies are tight because consumer demand is up, U.S. production is down and inventories are at record lows.” As in any free market, “when demand is up and supplies are down, prices soar,” he said.

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