FERC Chairman Pat Wood last week said that he thinks the United States will be looking at higher natural gas prices this year and into 2004 “to make up for the fact that we have not been replenishing at the level that we’re consuming.”

“I think, without question, there is always the delay for the market to respond,” Wood said at a Deloitte & Touche energy conference in Washington, DC. “It was a lot faster in ’01 to the crunch. The signal went up to everybody in 2000.”

Since that time, the problem has been that “a lot of this financial turmoil has made it hard for people to actually get the money or the capital to come back and respond to the market signals.”

He said that “restoring the trust in the financial books so that the capital markets get comfortable with investing in energy companies again, and energy companies can then go back” and invest and expand, “that’s a fix.” For the short term, “I think we’re going to see some higher prices.”

Those prices “may not be [at] the levels that have people super agitated, but I think you’re going to have some levels where…it’s higher than what we’ve had to pay in the past. Not as high as 2000-2001, though. I wish it were better, but it does take time to respond.”

At the same time, Wood said that he was “encouraged” by the recent storage data points. “I think the past five weeks with the storage injections — combined with the kind of weather we’ve gotten…are positive,” he said. “That’s luck that we would have a mild summer and allow the storage injections to go.”

Wood also said that “I’m not the oldest one in this room, but I certainly remember that this happened before,” referring to higher natural gas prices. “And a government over response to that really created a very bad situation for the future electric customers of the country,” he said, citing the Fuel Use Act of 1976.

“I think as the chattering class frets over the reregulation of natural gas, I don’t see anybody seriously embracing that sort of response to what is really…a supply and demand issue,” Wood said. “I fully expect that the market will respond as it did in the ’80s to very attractive price signals. I don’t know that we’ll ever get down to 92 cent gas again as we did for the early part of the ’90s, but I think that gas will find a new plateau and level out there.”

At a later point, Wood addressed the issue of pipelines from new natural gas supply areas. “I think as we move forward on that, it’s not just enough to build pipelines, but to actually have a place to build them to,” the FERC chairman said.

Wood noted that there has been a “substantial debate” in Washington, DC, about the importance of having supply available to be drilled. “I’m not going to make the old administration ANWR speech…but there are some areas that are not caribou breeding grounds or environmentally sensitive, that are not able to be drilled for this wonderful, benign fuel that we call natural gas,” he added.

“I think that’s a crime and it’s one that a lot of people in this town are talking about and I do hope that really the shock of $6.00 natural gas is going to allow people to think based on facts, as opposed to emotion, about the importance of utilizing our own national supply, in addition to what we import,” Wood said.

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