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Over a barrel: energy outlook continues grim

Goblins aren't likely to be the only frights this Halloween. That's about the time people will be firing up their furnaces for the winter heating season — and natural gas/fuel oil bills promise to be downright terrifying.

Depending on the region of the country, forecasts are for prices 10 percent to 20 percent higher than last winter.

With oil prices topping $50 per barrel at one point last week, and since natural gas/propane/butane/electricity/fuel oil prices tend to rise in concert with crude, prospects are that stratospheric prices will continue for all forms of energy, particularly with the outlook for ongoing unrest in the Mideast.

This hits the farmer's pocketbook from several angles. The diesel that powers most farm equipment is now commanding a higher price than unleaded gasoline. Costs for propane and electricity for irrigation pumping in many areas of the country have been tracking the rise in oil prices. And gins? I've heard $60,000 to $75,000 figures for monthly natural gas and electricity bills for high-volume operations.

The U.S. fertilizer industry has been particularly hard hit by the escalation in prices for natural gas, the primary feedstock for nitrogen production. Manufacturing capacity has been taken offline and The Fertilizer Institute reports that since mid-2000, when the natural gas crisis started, 15 U.S. nitrogen production facilities have been closed permanently.

Those facilities represented more than 22 percent of total U.S. nitrogen manufacturing capacity.

“There isn't enough nitrogen fertilizer being produced in the United States to meet the needs of our agriculture,” William F. Willard, testifying on behalf of The Fertilizer Institute, said at a recent hearing by the House Small Business Subcommittee on Rural Enterprise, Agriculture, and Technology.

“That's the heart of the matter as to why farmers are paying very high prices for their nitrogen products and the reason we manufacturers are having a difficult time procuring product,” he said.

For many fertilizer dealers, the only option for meeting the needs of their farmer customers is to import nitrogen products “at a prohibitively high cost.”

Missouri farmer Hal Swaney, testifying for the American Farm Bureau Federation, said U.S. farmers have been hit with an additional $6 billion in energy costs for the 2004 growing season.

“Natural gas accounts for nearly 90 percent of the cost of nitrogen fertilizer,” he said, noting that he paid $400 per ton for fertilizer this spring, 48 percent more than in 2002.

Farm Bureau believes that (losses in U.S. fertilizer manufacturing capacity) “will have a negative impact on America's food security, because our agriculture will become more dependent on foreign energy imports to meet demand,” Swaney said.

U.S. agricultural groups continue to pressure Congress to pass a comprehensive energy bill that would, among other things, increase domestic natural gas production and create more opportunities for home-grown, renewable fuels such as ethanol and biodiesel.

Given all the distractions surrounding the national elections and the likelihood that little will be accomplished by Congress for the balance of the term, prospects for passage of energy legislation this year are slim to none.

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