Economic Impact of Rising Natural Gas Prices

FRBSF Economic Letter #2001-04 dated February 9, 2001

In this latest Economic Letter, San Francisco Federal Reserve Bank Senior Economist Mary Daly examines recent trends in natural gas prices, including why prices are rising, the higher natural gas prices in California, and the economic effects of these rising prices in the District.

Mary Daly, Senior Economist

Federal Reserve Bank of San Francisco

Now available on the Internet at:

http://www.frbsf.org/publications/economics/letter/2001/el2001-04.html

Increased costs for natural gas have begun to show through to consumers and businesses in the Twelfth District. Heating bills and electricity rates have risen for consumers in a number of District states, and additional increases are expected for the duration of the winter. For businesses, higher energy costs have constrained profits and prompted some District manufacturers and service providers to shut down until prices settle back. This Economic Letter examines some of the factors contributing to the recent surge in natural gas prices, paying particular attention to the increases in California, and discusses whether this is likely to be a short- or long-term problem.

Lily Ruiz, Media Relations
Lily Ruiz
(415) 974-3240