Forecast: Gassing Up

Anyone who has paid more than $2 a gal. for gas or pondered an electricity bill lately might doubt that the U.S. energy crunch could be easing. Energy inflation in the past year has hit the economy like a slap in the face, and the sting has lingered. Collectively, we've spent $28.2 billion more on natural gas and electricity in the first quarter of this year than in the same period last year, money we could have used to buy other things that keep an economy going. But as more companies bring fuel supplies and power plants online, the worst of this year's rapid price hikes may be behind us--California excluded.

So say the energy experts of the TIME Board of Economists, who note that the recent high prices have stimulated new oil and gas production and increases in gasoline-refining capacity. "Market forces are already correcting some of the problems," says Bill Richardson, who was Bill Clinton's Secretary of Energy and is now teaching public policy at Harvard. Meanwhile, utilities may be adding new power plants to the grid at the rate of one a day. Richardson says the boost should enable the Midwest and Northeast to avoid blackouts this summer. And he expects the lights to stay on in New York City, which recently rushed emergency facilities into place.

Such stopgaps are needed because the aging transmission lines that link U.S. regions make it difficult to move power swiftly to where it is needed. "If energy is the lifeblood [of the economy], transmission is the arteries and the veins," says Thomas Kuhn, president of the Edison Electric Institute, which represents major power companies. But "congestion on the system has increased a tremendous amount," Kuhn notes, because the U.S. hasn't expanded its 2,000-mile grid of high-voltage lines in more than a decade.

That could be particularly hard on California, where consumers and companies are bracing for a summer of blackouts, thanks to the Golden State's famously botched deregulation plan. California produces 13% of the U.S. GDP and could become a national crisis all by itself if energy woes drag it into a slump. Richardson chides President George W. Bush for refusing to put temporary price caps on wholesale electric rates in California, which have risen to an astonishing $1,900/MW-h, vs. a precrisis $30/MW-h. But even if there were such caps, the former Energy Secretary adds, this would be "a horrendous summer in the West."

Richardson also urges the Administration to drop its laissez-faire stance toward OPEC and exert pressure on the cartel to raise exports of crude oil. OPEC voted this month to maintain its output at 24.2 million barrels a day. But it will meet again in July to consider raising prices if Iraq continues to withhold oil from the market as part of a running dispute with the U.N. over sanctions.

The panelists clashed over the roles that coal and natural gas should play in expanding supply. Richardson wants new plants to use natural gas because coal-fired generators spew carbon dioxide that contributes to global warming. Kuhn notes, however, that coal prices are typically lower and more stable than natural-gas prices and argues that better technology promises to reduce carbon-dioxide emissions as well.