Why? Because they want you to be. Who? The oil and gas dictators and their suckboys in Congress. Why? Because its easier for them to screw you if you're confused.
See, American's natural gas bills are up an average of 17% over winter 2004-2005. The industry blames Katrina and all those terrible environmental laws that are keeping them off of the last 10% of Federal lands in the West. BUT....as it turns out (oh gee, shock!) many state law-enforcement officials think a large part of that jump is due to price-gouging.
The energy industry rippin' us off?!?!? No way environmentalist, not possible!
Well, indeed. Missouri Attorney General Jay Nixon says a six-month investigation by four Midwestern states concludes that gas customers are paying $5 billion a month more than they should.
"They're clearly not getting a fair deal," Nixon says. "Demand stayed even, supply stayed even, but prices jagged up basically out of control for consumers as well as small businesses across the country this winter."
...reports that natural gas users around the country are opening their bills, seeing numbers like $300, $400 or $500 - and feeling like they're getting ripped off. "They are getting ripped off," Nixon says.
From Geenwire (sorry, no link):
Speculation by traders funnelling money into "largely unregulated" financial markets is the primary driver of skyrocketing natural gas prices, according to a report released yesterday by four Democratic state attorneys general.
The six-month study by the Consumer Federation of America found the speculation's role in gas pricing exceeded that of natural disasters and a tight natural gas supply and rising consumer demand. Attorneys general Lisa Madigan of Illinois, Tom Miller of Iowa, Jeremiah Nixon of Missouri and Peg Lautenschlager of Wisconsin ordered the report, which calls for expanded federal oversight of gas transactions.
"Both demand and supply have been relatively flat and steady over the past decade," Nixon said in a statement. "The price of natural gas, meanwhile, has been all over the place, with peaks and valleys that constantly ratchet upwards. This pattern does not square with traditional economic analysis of supply and demand."
The study says demand has declined somewhat over the last three years. Moreover, natural gas reserve additions have been growing and the reserve-to-production ratio has been increasing for the past six years, it says. And the long-term cost of producing gas is far below the current price being paid.
The report's author, Mark Cooper, the federation's research director, said the natural gas market is both tight and vulnerable but that the bigger problem lies in the lack of trading transparency.
From the report (sorry, no link here either but I have the pdf if anyone is interested):
From the consumer point of view, the wackiest aspect of $8.85 gas may not be the inversion of winter/spring prices or the lock-in of high prices through hedging, but the fact that $8.85 is considered a "soft" price. Even the continuing decline of spot prices to around $7.00 by mid-February did not really eliminate the consternation. Just four years earlier January gas was selling for about $2.25 per thousand cubic feet (mcf). An additional source of consternation stems from the fact that in the middle of December 2005, the Energy Information Administration (EIA) had revised its estimate for the production cost of gas upward to about $5.50 per million British thermal units (mmBtu). EIA's estimate, which is considerably higher than the $4.50 estimates of others, suggests that a massive premium, above the full cycle resource costs of production, is being paid for gas. Even more troubling from the consumer point of view is the fact that futures prices are well above the "soft" spot prices (see Exhibit I-2). March 2007 and 2008 prices are over $10.00, twice the cost of production. Hundreds of billions of dollars are at stake. There should be little surprise, then, that the public urgently wants an answer to a simple question....
What in the name of all that is holy is going on here?!?!?! The report explains:
Most of the news in the mainstream media will be bullish, all else being equal. This is because bad news makes news, whether it is characterized as corporate profiteering or consumer hardship, and good news for consumers is not interesting enough to be reported. From the consuming public's point of view, bullish price news is bad news. Probably nine out of ten stories in the mass media, all else being equal, will emphasize adverse consequences for average people (e.g., "the coming crisis in natural gas prices"). By contrast, in the producer community such "bad news" is good news, of course. That is, bullish news concerning higher natural gas prices or greater consumer demand is welcome news. This underscores the paradox of the media marketplace in the natural gas industry. The trade press is dominated by the interests of producers, with a bias in favor of higher prices that can support development of incremental supply for growth in consumer demand. The trade press reports and responds to the pronouncements and projections of stock analysts who cover the industry. These individuals write reports about the companies they follow, and they implicitly consider the interest of their industry to reside in higher prices. On the other hand, the mass media pick up pronouncements of high prices as news not because they see it as good news, but for precisely the opposite reason. It is bad news for consumers, and is therefore something worth reporting. Neither the producer-oriented media nor the consumer oriented media are served institutionally by bearish natural gas price news. Accordingly, bearish news or trends must fight for a place at the media "table," or will not get a seat. Bullish news, on the other hand, will always be given a seat. Large industrial users reiterate this feeling. "The only ones who prosper are finance markets and traders that do not produce, transport, or consume natural gas." [Huntsman] alleged that one of the country's largest financial institutions (which he declined to identify) had touted as "good news" new forecasts of a worse-than-normal hurricane season and the possibility of decreasing gas imports, would be excuses to force up prices. "It makes absolutely no sense."
Traders give these types of explanations when prices seem to be higher than seems justified by either fundamentals or technical factors. "They tried to hype the snow a bit at first, but realistically it=s not going to have a very big impact on overall storage draws."
Oh. Ok. So we're getting ripped off. But industry of course says "no way. We are honest - we just need to drill more". Suckboys like Sen. Pete V. Domenici (R-NM) follow them up tounges a dragging: "ya, ya. Drill more".
Denying any sort of reality and all the evidence out there that drilling will do NOTHING to lower gas prices.... there's a new bill to open up the Gulf and Florida coasts to...more drilling:
"The risk to Florida is so minimal compared to the benefits," said Sen. Pete Domenici, R-N.M., the panel's chairman and the bill's co-sponsor. He called the area "the most significant source of natural gas in the short term" in the United States.
The region, which first was singled out for energy development in 1997 by the Clinton administration, is believed to contain more than 6 trillion cubic feet of natural gas _ enough to heat 6 million homes for 15 years _ and nearly 1 billion barrels of oil, according to the Interior Department.
[snip]
Domenici argued that congressional assurance that a new supply of gas will be made available would have immediate impact on energy markets, driving down or at least stabilizing natural gas prices, which earlier in the winter soared to more than $14 per thousand cubic feet. Prices have since receded and the Energy Department expects wholesale gas prices to average about $8 per thousand cubic feet through this year.
Domenici says that a total of 6 trillion cubic feet of natural gas (about 20 to 25 percent of USA consumption in a single year) will "drive down or stabilize" natural gas prices. Well, I guess the good Senator missed the 60 percent nosedive in natural gas prices during the past 3 months - accomplished by commodities traders - without any appreciable changes in the physical supply of natural gas. The speculators who are drilling the consumers' pocketbooks are doing a substantially better job of manipulating prices than the natural gas drilling industry.
Confused? You outta be. Hell, you're supposed to be.
Crossposted at: UNBOSSED