Short-term energy outlook

EIA forecasts average expenditures for space-heating fuels to increase by $24 from 2010, expects natural gas working inventories to remain high through 2011. Estimates the total U.S. consumption of electricity this year to remain at about the same levels from 2010. Retail sales of electricity to the residential sector this year will fall 2%.


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  • EIA estimates that natural gas working inventories ended January 2011 at 2.3 trillion cubic feet (Tcf), about 30 billion cubic feet (Bcf) or 1% below the 2010 end-of-January level. Inventories are expected to remain high through 2011. The projected Henry Hub natural gas spot price averages $4.16 per million Btu (MMBtu) for 2011, $0.22 per MMBtu lower than the 2010 average. EIA expects the natural gas market to begin to tighten in 2012, with the Henry Hub spot price increasing to an average of $4.58 per MMBtu.
  • EIA forecasts average household expenditures for space-heating fuels to total $991 during this 2010-2011 winter season, $24 higher than last year. EIA projects higher expenditures for heating oil and propane, flat expenditures for electricity, but lower expenditures for natural gas. A forecast of milder weather in the South and the West compared with the 2009-2010 winter leads to lower fuel consumption in those areas.


U.S. Electricity Consumption - EIA expects total U.S. consumption of electricity in 2011 to remain at about the same level as consumption during 2010. Retail sales of electricity to the residential sector this year will fall 2.0% in response to the assumed 16-percent decline in cooling degree-days.

Consumption should grow by 2.5% during 2012 (U.S. Total Electricity Consumption Chart). During 2012, EIA’s assumption of a relatively strong increase in the number of households leads to a 2.3-percent increase in residential electricity sales. Continued robust growth in manufacturing output should drive growth in industrial electricity sales of 1.7% during 2011 and 2.3% in 2012.

U.S. Electricity Generation - Projected total generation by the electric power sector decreases by 0.2% in 2011, which is the same year-over-year decline as projected in last month’s Outlook. However, EIA has lowered its projections for growth in hydroelectric power this year to 0.9% compared to 6.0% in the last Outlook. This downward revision in hydro generation will be offset by natural gas-fired generation, which is now expected to grow slightly during 2011. During 2012, EIA expects a 2.5-percent increase in total electric power sector generation, which will be fueled primarily by increased generation from coal, natural gas, and non-hydropower renewables (U.S. Electric Power Sector Generation Growth Chart).

U.S. Electricity Retail Prices - EIA expects the U.S. retail price for electricity distributed to the residential sector to rise slightly (0.6%) during 2011, after a small increase of 0.7% during 2010. The U.S. residential price increases by about 0.7% in 2012. These price increases are relatively small compared with the average annual growth rate of 3.5% over the period of 2000-2009 (U.S. Residential Electricity Prices Chart). The effect of lower generation fuel costs should be more evident in retail electricity prices for the industrial sector, which are expected to fall about 2% this year after a similar rise last year. Projected industrial electricity prices should rise 0.8% in 2012.

Natural gas

U.S. Natural Gas Consumption - EIA expects that total natural gas consumption will remain flat from 2010 to 2011. Reported residential and commercial consumption are expected to decline by 0.3% and 2.4%, respectively, primarily because of changes to EIA’s methodology for collecting and reporting natural gas consumption data (see Changes in Natural Gas Monthly Consumption Data Collection and the Short-Term Energy Outlook). Industrial consumption rises from 18.0 billion cubic feet per day (Bcf/d) in 2010 to 18.3 Bcf/d in 2011 as the natural-gas weighted industrial production index increases 2.4% year over year.

Total consumption grows 1% in 2012, from 66.2 Bcf/d to 66.8 Bcf/d. Increases in natural gas consumption in the electric power sector (2.9%) and industrial sector (1.2%) are partially offset by slight declines in residential and commercial consumption. EIA expects electric power sector and industrial sector consumption to grow by 2.9% and 1.2%, respectively, in 2012.

U.S. Natural Gas Production and Imports - Total marketed natural gas production grew strongly throughout 2010 (4.4%), increasing from 59.7 Bcf/d in January to an estimated 63.7 Bcf/d in December. Year-over-year growth in 2011 is expected to slow considerably to just 0.8% as an increase of 1.0 Bcf/d in the lower-48 states is partially offset by a decline of 0.4 Bcf/d in the GOM.

The latest EIA data for monthly natural gas production in the Natural Gas Monthly, showed an increase in lower-48 states’ production for November 2010, reversing October’s decline. Modest declines are expected to resume and continue through 2011, however, because of a falling drilling rig count in response to lower prices. The number of rigs drilling for natural gas reported by Baker Hughes Inc. increased from a low of 665 in July 2009 to 973 in April 2010. Over the following 6 months the natural gas rig count stayed relatively unchanged. However, over the last 3 months the rig count has fallen, dropping to 911 rigs as of February 4. The large price difference between petroleum liquids and natural gas on an energy-equivalent basis contributes to an expected shift towards drilling for liquids rather than for dry gas.

Increasing consumption, especially in the electric power sector, contributes to higher prices and more economic incentive for producers to resume drilling. Total domestic natural gas production increases 1.1% in 2012. Lower-48 production is expected to increase throughout 2012 from 55.0 Bcf/d in January to 57.4 Bcf/d in December, which would be strong growth, but significantly less than during 2010. Federal GOM production declines slightly, by 0.4% (0.02 Bcf/d) in 2012.

EIA expects gross pipeline imports of 8.7 Bcf/d in 2011 and 8.2 Bcf/d in 2012, year-over-year decreases of 4.2 and 5.5%, respectively. Projected imports of liquefied natural gas (LNG) average 1.1 Bcf/d in 2011, a 4.4% decrease from 2010 levels. LNG imports in 2012 grow modestly to 1.2 Bcf/d. High domestic production, high inventories, and low U.S. prices relative to European and Asian markets should continue to discourage LNG imports.

U.S. Natural Gas Inventories - On January 28, 2011, working natural gas in storage stood at 2,353 Bcf, slightly below last year’s level at this time (U.S. Working Natural Gas in Storage Chart). At the end of the winter heating season (March 31, 2011), EIA expects that about 1,651 Bcf of working natural gas will remain in storage, which is a downward revision of about 120 Bcf from last month’s Outlook.

Colder-than-normal weather east of the Rocky Mountains in January contributed to a larger-than-expected draw on inventories. EIA expects near-record high inventories to continue through most of 2011. Falling production and greater consumption contribute to lower inventories in the second half of 2012.

U.S. Natural Gas Prices - The Henry Hub spot price averaged $4.49 per MMBtu in January, 2011, $0.24 per MMBtu greater than the average spot price in December 2010 (Henry Hub Natural Gas Price Chart). EIA expects that the Henry Hub spot price will average $4.16 per MMBtu in 2011, a drop of $0.22 per MMBtu from the 2010 average. EIA expects the natural gas market to begin to tighten in 2012, with the Henry Hub spot price increasing to an average of $4.58 per MMBtu.

Uncertainty over future natural gas prices is slightly lower this year compared with last year at this time. Natural gas futures for April 2011 delivery (for the 5-day period ending February 3) averaged $4.39 per MMBtu, and the average implied volatility over the same period was 34%. This produced lower and upper bounds for the 95-percent confidence interval for April 2011 contracts of $3.40 per MMBtu and $5.66 per MMBtu, respectively. At this time last year, the natural gas April 2010 futures contract averaged $5.35 per MMBtu and implied volatility averaged 46%. The corresponding lower and upper limits of the 95-percent confidence interval were $3.80 per MMBtu and $7.50 per MMBtu.

Carbon dioxide emissions

EIA estimates that fossil-fuel CO2 emissions increased by 3.6% in 2010 (U.S. Carbon Dioxide Emissions Growth Chart). Coal- and natural gas-related CO2 emissions reportedly rose as a result of increased usage of both fuels for electricity generation and higher consumption of natural gas in the industrial sector.

Projected increases for consumption of petroleum--primarily in the transportation sector--and natural gas are offset by declines in coal consumption in the electric power sector in 2011. As a result, forecast fossil-fuel CO2 emissions remain relatively flat in 2011. The forecast resumption of growth in electricity generation and improvement in economic growth in 2012 contribute to a 2.0-percent increase in fossil-fuel CO2 emissions. Projected fossil-fuel CO2 emissions in 2012 remain below the levels seen since 1999 and 4.3% below 2005 emissions.

- Edited by Amanda McLeman, Consulting-Specifying Engineer,

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