WASHINGTON, July 10: US Federal Reserve chairman Alan Greenspan warned on Thursday that soaring natural gas prices are starting to turn up the heat on parts of US industry.

“The updrift and volatility of the spot price for gas have put significant segments of the North American gas-using industry in a weakened competitive position,” Greenspan told a Senate panel.

“Unless this competitive position is addressed, new investment in these (natural gas) technologies will flag,” he said.

Long-term prices for natural gas in the United States had jumped in the past six years from $2 per million British thermal units (Btus) to $4.50, the powerful central bank boss said.

“The perceived tightening of long-term demand-supply balances is beginning to price some industrial demand out of the market. It is not clear whether these losses are temporary, pending a fall in price, or permanent.”

Imports of liquefied natural gas (LNG) had been negligible, with environmental and safety concerns limiting the number of LNG terminals required to handle them, he said.

In 2002, LNG imports accounted for one per cent of US gas supply.

Canada, meanwhile, had little capacity to expand exports, which recently accounted for one-sixth of US consumption.

“Given notable cost reductions for both liquefaction and transportation of LNG, significant global trade is developing,” Greenspan said.

“And high gas prices projected in the American distant futures market have made us a potential very large importer.”

Creating a large capacity to import LNG need not lead to an undue exposure to unstable sources of imports, the central bank chief said.—AFP