Impacts of Energy -Christopher Edmonds
6/04/03 11:18 AM ET The Street. com
Regarding the impact of higher energy prices on the economy, Brett's point is prescient. In fact, the impact of higher natural gas prices is already being felt.
Consider this: According Fertilizer Week, an industry trade rag the following companies have shut-down operations as a result of high natural gas prices: (1) Potash Corp. of Saskatchewan shut down its 45,900-short tons/month ammonia facility in Geismar, Louisiana, on Jun. 1; (2) Terra Industries shuttered 45,400-short tons/month ammonia plant in Verdigris, Oklahoma; Koch Industries curtailed its 42,750-short tons/month ammonia plant in Enid, Oklahoma; (4) IMC Global's cut production at its 46,660-short ton/month Faustina, Louisiana, plant.
That is 340,000 short tons/month of ammonia capacity has been cut back recently due, in large part, to natural gas pricing. This would equate to about 11.5 Bcf/month of gas demand.
While that is not enough to offset the dramatic shortage in natural gas storage we have seen, if prices remain high, it may be a precursor of things to come. And, demand destruction will necessarily lead to lower prices...but at a potentially large economic price.
Aaron mentions Iraqi production as the reason nobody is concerned about currently high oil prices. Those banking on a flood of Iraqi production are likely to be disappointed. If Venezuela is a guide, it will be many months before Iraqi production has an impact on global oil supply.
This is a great dialogue - more people should be talking about this issue, Brett is absolutely correct!
***************
Peter Eavis
Energy prices
6/04/03 11:27 AM ET
Guys,
We have to remember that Easy Al Fed is willingly stepping in to prevent higher energy prices taking their toll on the economy.
In a stable money environment, higher oil and gas prices would mean less spending on other items, but if the Fed steps in to create easy credit, the money is created to absorb the higher prices. That's happening right now. It means prices could continue to rise. And it certainly means deflation talk is utter nonsense manufactured by Fed officials to drive down bond rates.
None |
