The Big Chill
A winter fuel crisis of high prices and shortages could darken homes and factories
The simple economic rule of supply and demand is now at work: The market price of natural gas hit $15 per million British thermal units (Btu) last week, well over double what traders paid last year. Traditional storage measures, such as stockpiling gas in underground caverns in the fall, are not enough. The result: higher heating bills for consumers and hard choices for many businesses.
The 38 workers at Mill Hall Clay Products in central Pennsylvania will be looking for other jobs and collecting unemployment in January and February as their operation shuts down. Company president Robbie Hyde says transportation costs alone for natural gas will increase sixfold at the beginning of the year, as pipeline companies anticipate overwhelming demand in the Northeast. Hyde, who uses 100 billion Btu every year, can't afford to fire the beehive kilns where workers fashion clay chimney flue liners, decorative chimney tops, and bricks. He tracks the gas futures market on his office computer to find a price that will allow him to reopen in the spring. "I don't know if we're going to be able to weather the storm or not," he says. "It's day to day for us."
Out of options. Hundreds of factories will be similarly forced to lay off workers or freeze or cut wages because of high natural gas prices this winter, says the National Association of Manufacturers. Many large companies, like chemical giant Dow, have moved major operations overseas near cheaper fuel. But smaller domestic companies don't have that option. "In manufacturing, there's just one way to use less energy, and that's to make less widgets," says Paul Cicio, executive director of the Industrial Energy Consumers of America.
Industrial shutdowns are actually vital to the current energy market because they curb demand. Without them, prices would be even higher for consumers trying to heat homes.
Already, the bills are taking their toll. Mervalene Eastman fell behind on her natural-gas payments last winter when a $380 December bill to heat her four-bedroom Montana home rose by more than $100 in January and again in February. Eastman was an emergency dispatcher on the Crow Indian Reservation for more than a decade until medical problems forced her to leave her job. Then an aunt took sick and died, leaving Eastman to care for her 7-year-old son. In the midst of this tragedy, Montana-Dakota Utilities turned off her gas service last May. Now she owes not only back payments but a reconnection fee and a security deposit, which total more than $850. That sum has proved insurmountable. Eastman's teenage daughter goes to her brother's house for hot showers, and the family relies on a couple of space heaters. When it's especially cold at night, Eastman admits that she fires up the electric oven (not a safe practice). "My electric bill is so high, what I've been saving to pay MDU I've been tapping into to pay electric," she says, adding she was grateful for a mild November. "Once January comes, I don't know how I'm going to keep everybody warm."