WASHINGTON — The Energy Information Administration’s (EIA) short-term energy outlook for November indicates that the current economic downturn has led to a decrease in energy demand and a reduction in crude oil and other energy prices. As a result, projections for both energy demand and prices are much lower than last month’s outlook.
The impact of the economic downturn on demand is lowering current and expected natural gas prices. The Henry Hub natural gas spot price is projected to average $9.27 per Mcf in 2008. The projected 2009 annual average Henry Hub price is $6.82 per Mcf compared to $8.17 in last month’s outlook.
The Henry Hub spot price averaged $6.94 per Mcf in October, $0.94 per Mcf below the average spot price in September. The slowing economy, continued growth in domestic natural gas production, and the significant decline in oil prices have led to a dramatic shift in expectations for natural gas prices over the forecast. On an annual basis, the Henry Hub spot price, which averaged $7.17 per Mcf in 2007, is expected to average $9.25 per Mcf in 2008 and $6.82 per Mcf in 2009, $1.35 per Mcf lower than the forecast 2009 price in last month’s outlook.
The recent drop in power generation fuel costs has caused some utilities to reconsider the steep price increases announced this past summer, EIA says. However, fuel costs still remain high, and it’s unlikely that electricity rates for most customers will fall significantly in the near term, the report indicates. U.S. residential electricity prices are expected to increase by about 6.5% in both 2008 and 2009.
Residential natural gas prices during the current heating season (October though March) are projected to average $13.02 Mcf, an increase of 2% from the 2007-2008 heating season. Residential heating oil prices are projected to average $2.75 per gallon, a reduction of about 17% from last winter. Residential propane prices are projected to average $2.22 this winter, a decrease of 10% from last winter.
The average U.S. prices for regular-grade gasoline and diesel fuel, at $2.22 and $2.94 per gallon respectively on Nov. 10, were both more than $1.80 per gallon below their highs in mid-July. With a weak economy continuing through most of 2009, along with lower projected crude oil prices, the annual average retail gasoline and diesel prices in 2009 are projected to be $2.37 and $2.73 per gallon, respectively.
Have a question or comment? E-mail our editor Dave Davis at [email protected].