The U.S. is Running Out of Energy.

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In the years that it will take North Slope gas to reach the lower 48 states, natural-gas prices will keep moving up. In the short run, high temperatures this summer could produce spikes in prices and regional brownouts. In June natural gas sold for an average of $5.83 per 1 million BTUs, up 169% from the same week in 1998. Higher prices already are taking their toll on energy-dependent industries, like those that produce ammonia, the key ingredient in fertilizer. In June 1998 the Louisiana Ammonia Producers trade association had nine corporate members with 3,500 employees. Today it has one, CF Industries. "We've lost 2,000 employees," says Jim Harris, a spokesman for the producers, who accounted for 40% of America's ammonia output. "It's been devastating. The high natural-gas costs have been the overwhelming reason plants have closed. It's completely depressed the whole area."

Other businesses have sounded the alarm, among them a consortium of nearly two dozen companies, including pharmaceutical makers (Abbott Laboratories), brewers (Coors), chemical companies (Dow) and makers of building materials (Owens Corning). They have urged President Bush "to declare war on high natural-gas prices." Heading a list of recommendations: "Maximize use of other energy sources for power generation."

At the same time that Louisiana factories are laying off workers because of gas prices, the U.S. is shipping gas to Mexico to generate electricity there. While the volume is still comparatively small, exports nonetheless have swelled 674% over the past seven years, to 263 billion cu. ft. last year. El Paso Energy, for one, pipes gas directly to the new Samalayuca II power plant, about 25 miles south of Ciudad Juarez. It serves 1 million people and some 300 factories south of the border.

The potentially chronic natural-gas shortage and its impact on the economy and employment have even Alan Greenspan worried. Talking about the many industries dependent on natural gas, the Federal Reserve chairman told the Senate Energy Committee last week that "we do see the obvious loss of jobs ... because it has made us largely uncompetitive in a number of industries in which gas is a critical input." He also saw little hope that prices would fall. "We are not apt to return to earlier periods of relative abundance and low prices anytime soon," he said.

--LIQUEFIED NATURAL GAS: BACK TO THE FUTURE. To meet the surging demand for natural gas in the short term, Greenspan does see a solution: liquefied natural gas (LNG). He has told Congress that "given notable cost reductions for both liquefaction and transportation of LNG, significant global trade is developing. And high gas prices projected in the American distant futures market have made us a potential very large importer."

Translation: Because natural-gas prices are going up--and are going to stay up--it's now time to bring in more expensive LNG from the Caribbean, the Middle East, Africa and possibly Russia. To import natural gas, it must be chilled to minus 260°F, which converts it to a liquid and reduces its volume. An amount that would normally fill a beach ball can fit inside a Ping-Pong ball. When the liquid arrives at terminals in the U.S., it is slowly warmed up, returned to a vapor form and sent through pipelines.