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Energy Outlook: Lower Natural-Gas Prices, Less Consumption

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Photo: ©iStockphoto/aquaspects

Paul Partyka |

WASHINGTON — With natural-gas working inventories ending 2010 at about 1% below the 2009 record-setting end-of-December level, consumers can expect to pay slightly less for natural gas in 2011, according to the U.S. Energy Information Administration (EIA) short-term energy outlook.
The projected Henry Hub natural-gas spot price is expected to average $4.02 per million Btu (MMBtu) for 2011, $0.37 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 $4.50 per MMBtu.
EIA also expects total natural-gas consumption to decline 0.9% in 2011. Projected residential and commercial consumption is expected to drop partly because of the forecast of 1.3% fewer heating-degree days during the winter months this year compared with last year, but also because of recent changes in the way EIA collects and reports natural-gas consumption data.
At the end of the winter-heating season (March 31), EIA expects the amount of working natural gas to be at a record high, well above last year’s level.
For propane users, residential prices are $2.740 per gallon (as of Jan. 3), up $.142 from last month. Wholesale propane prices are $1.415, up $.099 from last month.
EIA expects total U.S. consumption of electricity to fall slightly during 2011, and then grow by 2.6% in 2012. Forecast growth in manufacturing output should lead to increases in industrial-sector electricity sales of 1.5% this year and 2.2% in 2012.
If your recent trips to the pump have been both painful and confusing, you’re not alone. Even EIA is a bit puzzled. EIA expects regular-grade motor-gasoline retail prices to average $3.17 per gallon this year, 39 cents per gallon higher than last year. There is some regional variation in the forecast, with average expected prices on the West Coast about 25 cents per gallon above the national average during the April-through-September period.
There is also significant uncertainty surrounding the forecast, with the current market prices of futures and options contracts for gasoline suggesting more than a 25% probability that the national average retail price for regular gasoline could exceed $3.50 per gallon in the June-through-September period in 2011 and an 8-10% probability that it could exceed $4 per gallon in August and September.

About the author

Paul Partyka

American Coin-Op

Paul Partyka was editor of American Coin-Op from 1997 through May 2011.

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