Statement by the American Chemistry Council on Natural Gas Prices

2/25/2003

From: Tom Gilroy of the American Chemistry Council 703-741-5804 or Tom_Gilroy@americanchemistry.com

ARLINGTON, Va., Feb. 25 -- The following is a statement by the American Chemistry Council on natural gas prices:

Today, the Senate Energy Committee is holding a hearing on natural gas supplies. The hearing could not come at a more important time. Yesterday, the spot price for natural gas reached its highest in history and supplies are at an all-time low. The American Chemistry Council, the nation's largest user of natural gas, released the following statement:

America has a new energy crisis. This time it is the runaway price of natural gas. Congress must act now to ease the natural gas crisis or the nation's fragile economic recovery will return to recession.

Every recession since World War II has been preceded by a run-up in energy prices. Today, we are witnessing an unprecedented increase in natural gas prices.

If the price of milk topped $16 a gallon, Congress would not hesitate to act. Today, natural gas prices are equivalent to $16 for a gallon of milk, $12.70 for a pound of ground beef, and $9.21 for a gallon of gasoline. Every American will feel the effect of skyrocketing natural gas prices in the form of more expensive food, higher home heating prices, and higher prices for most consumer products.

Natural gas is to the economy as water is to an ecosystem. And today, America is facing the worst drought in natural gas stocks in the nation's history. As a result, natural gas is now trading at six times the price it did three years ago.

The cause of this crisis is the failure to enact a national energy policy that restores balance to energy markets. The chemical industry is the nation's largest user of natural gas and is acutely sensitive to irrational volatility in gas prices. Natural gas is much more than just a fuel to heat homes and offices. Chemical companies convert billions of dollars of natural gas into hundreds of billions of dollars of goods that are used by everybody, everyday.

Congress must take urgent action to head off an economic catastrophe. The Council is calling on Congress to enact the following policies:

-- The U.S. must increase domestic production of natural gas. Recent legislative, regulatory and market trends have placed greater demands on our natural gas supply without providing for commensurate measures to increase production.

-- Congress must reject initiatives to place moratoria on responsible new exploration and production. It also must open new, promising areas to exploration and production.

-- Congress also should take action to enable timely increases in the amount of natural gas that is imported to the U.S. via pipelines, particularly from Canada, and in the form of liquefied natural gas.

-- Congress also should ensure that ample supplies of natural gas can be delivered to the customer. It should recognize fundamental changes in the energy industry are limiting the ability to capitalize and finance high-risk infrastructure projects to deliver natural gas. Federal policies should not exacerbate this capital liquidity problem.

-- Congress should support federal efforts to streamline natural gas pipeline construction to enable gas to enter the mid-continent and Northeastern markets.

-- Congress should encourage the expanded use of highly efficient combined heat and power (CHP) generation systems.

-- Congress and the Administration should advance development of electric power production from clean coal technologies to take advantage of our nation's natural energy resources.

--- Energy Feedstocks and the Business of Chemistry

The Business of Chemistry is a tale of two distinct uses of energy resources. Like other industries, the business of chemistry uses oil, natural gas and natural gas liquids to power our plants and processes. But just as important, the business of chemistry uses those same energy sources to make products, products we all use, every day.

In addition to serving as fuel, oil, natural gas and natural gas liquids are incredibly valuable as feedstocks - raw materials we convert into consumer products. Much like a furniture maker turns timber into a table, the business of chemistry turns energy resources into products used to make cars, computers, clothing, and many other everyday products.

No other segment of the economy adds value to energy products like the business of chemistry. Sales of chemical products made from energy-based raw materials exceeded $200 billion last year.

Who uses these products? The answer may come as a surprise. Natural gas and natural gas liquids sold to the business of chemistry are transformed into an astonishing array of products, including automotive parts, construction materials, apparel, food packaging, computer and telephone equipment, sporting goods, home furnishings and appliances, cosmetics and toiletries, consumer electronics, medicines and hospital equipment, the list goes on and on.

Using energy products as feedstocks is an essential use of these precious and versatile natural resources. In fact, using these resources to make products -- instead of fuel -- has actually helped make the nation more energy efficient. That's right. Refrigerators and other appliances are far more energy efficient today than a generation ago. That's largely because insulation materials, derived from chemicals derived from oil and gas, have dramatically reduced the amount of electricity used to run a refrigerator. The same is true for automobiles. Body parts and engine equipment, made from chemicals made from oil, natural gas and natural gas liquids, make today's cars lighter, stronger, and more durable than their predecessors. In other words -- more efficient.

Using energy to make products that save energy. Now there's a bright idea.

------ Comparison of Consumer Product Prices to Natural Gas

If the prices of everyday consumer products spiked like they did for natural gas, we would be paying these prices:

...................Current Prices...Price today if natural gas ....................(Jan. 2003).....price increases were applied ................................................................ Milk (1 gallon 2 pct.). 2.89................ 16.03............ Eggs (1 doz. Large).... 0.99................ 5.49............. Bread (1 loaf)......... 1.59................ 8.82............. Sugar (5 lb. Bag)...... 2.09................ 11.59............ Baby food (4 oz. Jar).. 0.65................ 3.60............. Diapers (Jumbo package) 12.69............... 70.37............ Spaghetti (1 lb.)...... 1.15................ 6.38............. Tomato soup (10.7 oz).. 0.89................ 4.94............. Bananas (1 lb.)........ 0.59................ 3.27............. Potatoes (5 lb. Bag)... 3.49................ 19.35............ Ground beef (1 lb.).... 2.29................ 12.70............ Gasoline (1) (1. Gal.). 1.66................ 9.21............. Rent (2)............... 632.00.............. 3,504.73.........

(1) average for week ending 2/21/03 (AAA Survey) (2) 2001 national median, American Housing Survey

Natural Gas ($/mmbtu Henry Hub) Average 1992-1999: $2.20 Price on Feb 24, 2003: $12.20 Pct. Change: 455 pct.

------ The American Chemistry Council (ACC) represents the leading companies engaged in the business of chemistry. ACC members apply the science of chemistry to make innovative products and services that make people's lives better, healthier and safer. ACC is committed to improved environmental, health and safety performance through Responsible Care, common sense advocacy designed to address major public policy issues, and health and environmental research and product testing. The business of chemistry is a $450 billion enterprise and a key element of the nation's economy. It is the nation's largest exporter, accounting for ten cents out of every dollar in U.S. exports. Chemistry companies invest more in research and development than any other business sector. Safety and security have always been primary concerns of ACC members, and they have intensified their efforts, working closely with government agencies to improve security and to defend against any threat to the nation's critical infrastructure.