Energy/Fuel Outlook: Stability and Volatility


gas meter
Photo: ©iStockphoto/aquaspects

Paul Partyka |

WASHINGTON — The prices for natural gas and electricity remain stable, while regular-grade motor gasoline continues to climb, according to the most recent U.S. Energy Information Administration (EIA) short-term energy outlook.

Natural gas working inventories ended March 2011 at 1.6 trillion cubic feet (Tcf), slightly below the 2010 end-of-March level. EIA expects that working gas inventories will remain relatively high throughout 2011.

The projected Henry Hub natural-gas spot price is expected to average $4.10 per million Btu (MMBtu) in 2011, $0.29 per MMBtu lower than the 2010 average. EIA also expects the natural-gas market to begin to tighten in 2012.

The Henry Hub spot price averaged $3.97 per MMBtu in March, 12 cents lower than the average price in February and 6 cents lower than the March forecast in last month’s Outlook.

EIA expects an increase of 0.2% in total U.S. electricity consumption during 2011. While retail sales of electricity to the residential sector are expected to decline this year, improved economic conditions during 2011 should spur growth in sales of electricity to the commercial and industrial sectors of 1% and 2.5%, respectively.

The effect of lower generation fuel costs should be more evident during 2011 in retail prices for electricity distributed to the industrial sector, which EIA projects will increase by only 0.9% during 2011, then fall slightly, by 0.2% next year.

EIA projects that the retail price of regular-grade motor gasoline will average $3.86 per gallon during the summer’s driving season (April 1 through Sept. 30), up from $2.76 per gallon last summer.

Current market prices of futures and options contracts for gasoline suggest a 33% probability that the national monthly average retail price for regular gasoline could exceed $4 per gallon during July.

Weekly and daily national average prices can differ significantly from monthly and seasonal averages, and there are significant differences across regions, with monthly average prices in some areas exceeding the national average price by 25 cents per gallon or more.

The projected increase in gasoline prices suggests that vehicle-fueling costs for the average U.S. household will be about $825 higher in 2011 than they were in 2010,

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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