URL: http://www.denver-rmn.com/business/0110ener2.shtml

Analyst says nation near energy crisis Expert says problem to last rest of decade

By Heather Draper Denver Rocky Mountain News Staff Writer

--------------------------------------------------------------------------------

The nation's energy problem isn't yet a crisis, but it has all the elements of one, energy analyst Tom Petrie said Tuesday.

"It's a workable situation, not a crisis. But it's going to take most of this decade to get out of this (supply and demand) imbalance," said Petrie, co-founder of Denver-based Petrie Parkman & Co., an oil and gas investment banking firm. Petrie was speaking at a Denver Society of Security Analysts luncheon.

Growing evidence of the nation's energy woes include ongoing power shortages in California, tight gasoline supplies last summer in the Midwest, the price of West Texas crude hitting $37 a barrel last October — its highest level since the Persian Gulf War — and spot natural gas prices exceeding $50 per million British thermal units in Los Angeles in December because of supply concerns, Petrie said.

In Colorado, consumers will be paying twice as much for their heating bills this winter than they were last winter because of natural gas prices skyrocketing on supply concerns.

Petrie said the amount of natural gas in storage in the United States is at its lowest level since the American Gas Association began tracking gas inventory data.

U.S. demand for natural gas is projected to exceed 30 trillion cubic feet by 2010 — an increase of nearly 50 percent — and U.S. gas production has lagged since April 1999, he said.

On the oil side, OPEC's spare producing capacity has contracted sharply in recent years, adding to the nation's energy problems, he said. The oil-exporting nations used to have spare producing capacity of about 7 million to 16 million barrels a day, Petrie said, which provided "a huge cushion that allowed the world economy to grow unfettered."

"OPEC now has less than 3 million barrels a day of excess producing capacity, so we have no cushion to deal with a major event ... like the Gulf War," he said.

Petrie said the nation will likely go into "an energy-induced recession because many industries are seriously on the ropes" because of the high costs of natural gas and electricity. But that's exactly what the nation needs to get the energy sector back on track, he said.

"The industry is doing all it can with a tight labor market and limited access to (exploration) acreage to bring new supply to the market," Petrie said. "But clearly we need an economic slowdown to have the time we need to get this supply and demand situation back in balance."

Petrie, who has been an energy analyst for nearly 30 years, said President-elect Bush's energy policy "will define the success or failure of this administration."

He said three key Bush Cabinet choices, who all have energy experience, will help boost oil and gas exploration in coming years: Colorado attorney Gale Norton, interior secretary; Don Evans, commerce secretary; and Spencer Abraham, energy secretary.

Norton and Abraham support oil drilling in the Arctic National Wildlife Refuge, which has drawn sharp criticism from environmental groups. But Petrie believes it would be a "huge mistake" for the United States not to open up the Arctic coastal plain to exploration because of the nation's escalating energy demands.

January 10, 2001

-- Martin Thompson (mthom1927@aol.com), January 10, 2001