By Mike Boyer
Enquirer staff writer

COVINGTON - Oil prices, on the doorstep of $50 a barrel, are a sign of a much larger problem for the United States, a national expert told an energy symposium Friday.

"It's my belief we are at a fundamental transition point,'' said Andrew Weissman, chairman of Energy Ventures Group, a Washington, D.C., energy investment firm.

"We're moving from an era where we had adequate supplies of energy to an era where, for the most part, energy supplies will be less abundant and significantly higher-priced. The transition will be fairly bumpy.''

With $50 a barrel in sight, oil traders are focused on Iraq, where tensions between U.S. forces and rebel fighters appeared to ease Friday.

Oil prices made an about-face, falling below $48 a barrel. U.S. light crude for September delivery dropped 84 cents to settle at $47.86 on the New York Mercantile Exchange, retreating from Thursday's record closing price of $48.70.

But crude futures have soared more than 50 percent in the past year.

Weissman, a consultant to energy companies who helped pioneer trading of emission allowances under the Clean Air Act, was keynote speaker at a daylong gathering sponsored by Stand Energy Corp., an independent energy supplier in Mount Adams.

The privately held company, which is marking its 20th anniversary, brought about 100 of its largest customers to the Marriott at RiverCenter here to discuss energy issues.

Although the focus of Weissman's remarks was the crisis in natural gas supply and demand, he noted that oil at $49 a barrel oil comes even as most experts at the start of the year were predicting it would end the year under $30.

Weissman said most experts don't understand the fundamentals driving energy prices.

One of those is that energy price volatility is increasing dramatically as energy supplies become scarcer.

Much of that price volatility has been masked this summer, he said, because milder weather has reduced natural gas demand for electricity generation.

Before July 4th, he said most weather forecasters were predicting a hotter-than-normal July and August. What's happened is that the last two months have been "one of the coolest stretches in U.S. history, relieving pressure on natural gas" prices, he said.

A weaker economy and milder weather have allowed the U.S. to avoid much higher natural gas prices over the last few years, but that isn't likely to continue, he said.

Fundamental to the impending crisis in natural gas are two facts, Weissman said.

One is that North American supplies of natural gas have basically maxed out.

"We're at the point of diminishing returns. Most regional (gas) fields can't significantly increase production, especially in the Gulf of Mexico,'' he said.

The second is that natural gas generation accounts for most of the incremental increase is U.S. electricity production.

To meet increasing natural gas demand, the U.S. will have to turn to more imports of liquefied natural gas (LGN), which now account for just 3 percent to total supplies.

But that poses a series of other challenges because it takes years to develop the infrastructure to produce and ship more LGN.

"We're facing significantly higher prices and not doing enough to prepare for it. It isn't an easy message in a lot of ways,'' he said. But the problems aren't unsolvable.

"We're a country that can solve problems, if we understand them clearly.''

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The Associated Press contributed. E-mail mboyer@enquirer.com