Power predictions
WASHINGTON, D.C. – Regular-grade gasoline prices should peak at a national average of $4.15 a gallon in August, according to the Energy Information Administration (EIA). The average price for the ear is expected to be $3.78 a gallon for 2008, or 97 cents more than the 2007 average price.
These price increases stem from a combination of rising consumption, cuts in supply from the Organization of the Petroleum Exporting Countries (OPEC), and low surplus. Non-OPEC nations will likely be challenged to make up the difference due to disruptions in supply (e.g., in Nigeria), ongoing political concerns (e.g., in Venezuela and Iran), and decreasing production (e.g., in Russia, Norway, Mexico, and Brazil), notes EIA.
At the same time, gas consumption continues to grow. Indeed, preliminary data indicates that global oil consumption rose by about 630,000 barrels a day. In Organization for Economic Cooperation and Development (OECD) countries, such as the United States, this growth is slower than anticipated. But it is much faster in non-OECD, led by China, India, and the Middle East.
U.S. petroleum consumption is expected to remain fairly constant. Total petroleum consumption of liquid fuels and other petroleum products averaged 20.7 million barrels a day in 2007, similar to 2006, and is expected to shrink by 290,000 barrels a day in 2008.
Production is projected to stay the same as in 2006 and 2007, an average of 5.1 million barrels a day, according to EIA. Declines in Alaskan production will likely be made up by increases in the lower 48 states and in the Federal Gulf of Mexico region.
Pricing will continue to increase. Crude oil prices, which averaged $72 per barrel in 2007, are projected to average $122 a barrel in 2008. And EIA anticipates that regular-grade motor gasoline retail prices, which averaged $2.81 per gallon in 2007, will average $3.78 per gallon this year. Diesel fuel retail prices in 2008 and 2009 are projected to average $4.32 per gallon, up from $2.88 per gallon last year, reflecting the strength in diesel demand, particularly in emerging markets.
Similarly, total natural gas consumption is expected to increase by 2.2% in 2008 and by 0.9% in 2009, according to EIA. Year-over-year increases in the residential, commercial, and electric power sectors have been largely weather-driven. In 2009, residential, and commercial sector consumption is expected to be decline slightly while natural gas consumption for electricity generation is expected to increase by 2.5%. Growth in the industrial sector, which rose 4.8% in the first quarter of 2008 compared with the corresponding period last year, seems to be tied to export strength and some resurgence in natural-gas-intensive industries, such as fertilizers. In annual terms, natural gas consumption in the industrial sector is expected to increase by 1.3% in 2008 and 0.4% in 2009.
Total U.S. marketed natural gas production is expected to increase by 6% in 2008 and by 1.5% in 2009, including hurricane-induced outages. Due to increased numbers of rigs, particularly in unconventional reserve basins, marketed natural gas production in 2009 from the Federal Gulf of Mexico is projected to increase by 2.6% while the lower-48 onshore region is expected to increase by 1.4%. Prices are expected to rise slightly due to high oil prices, low liquefied natural gas (LNG) imports, increases in consumption, and a year-over-year decline in working inventories, notes EIA.
Electricity use is affected greatly by summer heat. EIA notes that summer temperatures are expected to fall back to near-normal levels, thus limiting annual growth in electricity consumption to 0.6% for 2008. Consumption is expected to grow at a higher rate of 1.6% in 2009. While EIA provided no commercial rates, it expects the average U.S. residential electricity prices to increase by about 3.7% in 2008 and by 3.6% in 2009.
Finally, electric-power-sector coal consumption grew by 1.9% in 2007. Slow growth in total electricity consumption is expected to limit growth in electric-power-sector coal consumption to 0.9% in 2008. Projected increases from other generation sources (e.g., nuclear, natural gas, hydroelectric, and wind) in 2009 will continue to dampen electric-power-sector coal consumption growth, which are projected to be 0.6% in 2009.
U.S. coal production is estimated to have fallen by 1.5% in 2007. Growth in domestic consumption and exports will contribute to a 2.9% increase in coal production in 2008. the EIA makes no predictions about pricing changes for coal.
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