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6 Natural Gas and the Ability to Price It was sunny, but a freezing and blustery 28°F that felt like 13°F with the wind chill on January 20, 1977, as Jimmy Carter, having just been sworn in as president, walked from the capitol toward the White House, holding hands with his wife, Rosalyn, and his daughter, Amy. The bone-chilling cold was not surprising that January afternoon; the winter had been far colder than usual. Three days earlier the temperature in New York’s Central Park had been the lowest—one degree below zero—since weather records began being kept, shortly after the Civil War. And New York City was balmy compared to Cincinnati, Ohio, which also set a new record that day at minus 24°F. Similar records were being set all over the eastern half of the country. The day following his inauguration President Carter urged the country to turn its thermostats down to 65 degrees, three degrees lower than Richard Nixon had asked for in the midst of the Middle East oil embargo. A week later James Schlesinger, now serving as the White House energy czar, reported to the House Subcommittee on Energy and Power that it had been 20 percent colder than normal nationally in November and December and that in the Southeast temperatures had been between 40 and 50 percent colder than normal. With the wind chill that January day, parts of Minnesota felt like 100 degrees below zero. The Ohio River had frozen for the first time in 30 years, trapping dozens of barges carrying fuel oil, road salt, and other products. More than 200,000 workers had been laid off at least temporarily by then because their employers were unable to get natural gas to heat their plants. A similar number of schoolchildren had also been sent home. Governors of eight states in the Midwest and Northeast declared states of emergency. Natural-gas supplies were shrinking. The National Fuel Gas Company, which served western New York, northeastern Pennsylvania, 98 Chapter 6 and eastern Ohio, asked its school and business customers to close for at least a few days and requested that its residential customers lower their thermostats to 55 degrees. All four U.S. auto companies closed their plants, mostly in Michigan and Ohio, adding another 56,000 workers to the ranks of the unemployed. Hardships also spread to the Southeast. In Birmingham , Alabama, for example, United States Steel furloughed more than 4,000 of its 10,000 workers. GE, which used natural gas not only for heat but also to seal the light bulbs it manufactured, laid off 6,000 workers in lamp factories alone. In the winter of 1977 and again the following winter, a genuine crisis in natural-gas supply caused enormous hardship and substantial economic losses for this nation, especially in states east of the Mississippi. The Carter administration later estimated that 1.8 million workers were at least temporarily unemployed that winter due to the shortages. Not everyone was bothered, however. In the gas-producing states of Texas, Louisiana, and Oklahoma, natural gas was plentiful. These three states alone were consuming more than 40 percent of the nation’s supply. In Texas, bumper stickers appeared saying, “Turn up the gas and freeze a Yankee” and “Let the Yankee bastards freeze.” People tended to blame the weather for the natural-gas shortages that were causing such hardship, but record-breaking cold was only partly at fault. Indeed, earlier in the decade during the less extreme winters of 1972 through 1975, many interstate gas pipelines could not obtain enough gas to fulfill their contractual obligations. For the year from April 1973 through March 1974 alone, gas curtailments involved as much lost energy as the nation experienced from the oil embargo in the first quarter of 1974, even though the 1973–1974 winter was not unusually cold. Because fuel oil frequently serves as a substitute for natural gas, these gas shortages increased the demand for oil, including imported oil, at the worst possible time. The culprit—though not everyone recognized it as such—was artificially low prices. Natural gas was first used for street lighting, but it soon became a popular fuel for heating and cooking. By the early 1970s, it supplied nearly one-third of the total energy used in the United States. In 1972, about two-fifths of the natural gas consumed in the United States was used by industry, one-fifth for generating electricity...

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