cheap heating oil may slow conversion to natural gas


FAIRBANKS Low heating oil prices may cause a third fewer households in the Interior to convert to natural gas once gas is more widely available.

That’s the conclusion of an updated report commissioned by the Interior Energy Project examining the impact heating oil prices will have on the likelihood people convert to natural gas. Delivered gas is on target for delivery in late 2018.

The initial report on demand was released last year, but an update spurred by even lower oil prices was released as part of the quarterly update from the Interior Energy Project to the Alaska Legislature earlier this month.

“The significant change in the cheap jerseys price of heating fuel required a fresh look at the ‘willingness to convert’ with specific attention paid to the closing of the cost gap between heating fuel and the IEP natural gas price targets,” the report explained.

The drop of a third of conversions occurs under the “most conservative scenario” of low heating fuel prices.

The target price of the Interior Energy Project was a price equivalent to a $2 gallon of heating fuel was set when heating fuel hovered near $4 per gallon. But since then, the price of heating fuel has plummeted down near to $2 per gallon, throwing the Interior Energy Project’s initial estimates for demand on end.

The report anticipates about 1,000 conversions in the early years, ramping up to 2,000 per year in the 2020s. The 2023 customer base, the last year included in the report, estimates about 10,800 people will be using natural gas.

Currently, Fairbanks Natural Gas has about 1,000 residential and business customers.

Interior Gas Utility Manager Jomo Stewart said of the potentially lower demand that the project has been inherently difficult since its inception noting a reliable and affordable source of energy has long eluded Fairbanks but the point of the project is to overcome that challenge.

“So much of this is impacted by demand and when and how that demand shows up,” he said. “That’s just the reality. The project is effectively the state trying to bend the laws of normal economics. If it was easy and it was cheap, it would have already been done.”

He said the revised estimates will put additional pressure to make sure everything going into the project from the source gas to the burner tip in a home and everything in between will drive costs down.

He also stressed that one of the benefits of natural gas will be a more stable and reliable heating source when compared to heating oil, which has had plenty of wild ups and downs.

“We’ve been riding the market roller coaster in a way that Anchorage simply has been insulated from,” he said. “Even now as high as their cost of energy is, I’ve got 100,000 friends who would love to feel their pain.”

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