WASHINGTON Gas, heat prices to remain elevated

The price for electricity is also expected to increase next year.
WASHINGTON (AP) -- People may have to get used to high gasoline and heating costs long beyond winter because tight energy markets are projected through 2006, industry and government officials said Friday.
Howard Gruenspecht, deputy administrator of the Energy Information Administration, said average gasoline prices are likely to be higher next year, although not as high as in the immediate aftermath of the hurricanes that disrupted supplies from the Gulf Coast region.
He said that the EIA, the Energy Department's statistical agency, has revised upward its expectations of crude oil prices over the next few years and that crude prices are not likely to decline much.
"We don't see a big softening" in oil prices, said Gruenspecht.
Oil prices and additives
Crude oil has hovered around $60 a barrel, and natural gas prices for delivery in January soared to nearly $15 a thousand cubic feet this week, although retreating somewhat Friday on the New York Mercantile Exchange. Natural gas cost about $7 a thousand cubic feet a year ago.
While gasoline prices have dropped for nine straight weeks to a national average of about $2.15 a gallon, stocks of the motor fuel "are far below last year's levels" right now, which could contribute to tight gasoline supplies next year, he said.
Gruenspecht said a number of refiners also are expected to stop using the additive MTBE next year which could put more upward pressure on prices at the pump in 2006. MTBE is used to reduce tailpipe emissions, but also has been found to contaminate drinking water supplies.
The energy law enacted earlier this year removes the requirement for refiners to use an oxygenate, such as MTBE, for clean air purposes.
But MTBE accounts for about 11 percent of the fuel by volume and while refiners could add ethanol, eliminating its use may require some refiners to produce more gasoline, putting added pressure on refiners.
Weather effects
Meanwhile, this year's high heating prices might not be an anomaly, said David Parker, president of the American Gas Association, who along with Gruenspecht and several other energy industry executives, participated in a news conference sponsored by the trade publication Energy Daily.
If there is a hotter than normal summer putting high demand on natural gas supplies next winter "will be equally as bad as this year," said Parker. He said there already are signs of trouble for 2006-07, citing the trend of continuing high natural gas prices well into next year and expectations of a warmer than normal summer.
The continuation of high fuel prices will make it harder for gas utilities to lower their retail prices through market hedging and will force them to pay more for gas that they put into storage during summer months, meaning higher prices next winter, said Parker.
Lights on, lights off
Electricity prices are also expected to increase amid concerns about possible rolling blackouts in parts of the Northeast this winter.
Tom Kuhn, president of the Edison Electric Institute which represents investor-owned electric utilities, said natural gas availability and price "is our biggest concern" this winter, especially in areas where utilities rely heavily on the fuel for power production.
About 40 percent of the electricity used in New England comes from plants powered by natural gas.
Parker said if there is a normal winter -- as expected by weather forecasters -- there should be no interruption of natural gas supplies "but it's going to be pricey."