Watching Your Wallet: Energy Expenses to Rise

Paul Partyka |

WASHINGTON — Even if the U.S. real gross domestic product declines in the first half of the year as expected, don’t expect some of your basic expenses to follow the same course. The government’s Energy Information Administration (EIA) just issued its short-term energy and summer fuels outlook and the news isn’t great for laundry operators.First, if you put on a lot of mileage when traveling to your laundry, pump prices are going to put a hurt on your wallet, according to the EIA. The monthly average gasoline price is projected to peak at about $3.60 per gallon this summer. It is possible, the EIA adds, that prices at some point will cross the $4 per gallon threshold, despite the fact that gasoline consumption is projected to decline this summer by 0.4% due to the current economic slowdown and high retail prices.The economic stimulus payments scheduled to start in May, are expected to boost real disposable income but are not expected to have a significant impact on gasoline consumption.Total natural gas consumption is expected to increase by 1.0% in 2008. The assumption of normal weather is expected to lead to limited growth in both the commercial and residential sectors in 2008. Milder summer temperatures are also expected to leave natural gas consumption for electricity generation unchanged in 2008.While consumption is expected to hold steady, the Henry Hub spot price averaged $9.74 Mcf in March, nearly $1 per Mcf more than the average spot price in February. This was the first month since December 2005 that Henry Hub spot prices averaged more than $9 per Mcf. The recent upward price shift reflects a number of factors, including the drop off in imports compared to year-ago levels, high oil prices and the drawdown in storage to the lowest levels in four years.As seasonal demand wanes, spot prices are expected to decline before they rise again toward a winter peak. On an annual basis, the Henry Hub spot price is expected to average about $8.59 per Mcf in 2008 and $8.32 per Mcf in 2009. The Henry Hub natural gas spot price averaged $7.17 per Mcf in 2007.Cooling degree-days in the summers of 2006 and 2007 were 12% and 10% higher than normal, respectively. Given the assumption that summer temperatures this year will be close to normal, total annual electricity consumption is expected to grow at a relatively slow rate of 0.7% in 2008. Residential electricity prices are projected to increase at a rate of 2.7% in 2008 and a slightly higher rate of 3.1% in 2009. 

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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