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Macroeconomic and Industrial Effects of Higher Natural Gas Prices

Over the past year, there has been some concern over the potential economic impact of unusually high natural gas prices. Although natural gas prices declined from $10 per thousand cubic feet (mcf) in December 2005 to about $6 recently, the Energy Information Administration (EIA) expects prices to return to the unprecedented price levels of last year as we move back into this winter’s heating season. The recent decline reflected recovery of the natural gas industry from the hurricanes of last year, increased supply moving into the U.S. through pipelines and liquefied natural gas terminals, and moving away from last winter’s heating season. Because of the expected resurgence of natural gas prices, there has been continuing concern over the potential economic impact of unusually high natural gas prices.

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