Coal

EIA: Natural gas prices and electricity use forecast to decline

12 November 2008 — According to the U.S. Department of Energy Energy Information Administration Short-Term Energy Outlook, the economic downturn has led to lowered projections for both natural gas prices and electricity consumption in 2009.

The slowing economy, continued growth in domestic natural gas production and the decline in oil prices have led to a shift in expectations for natural gas prices over the forecast.

The Henry Hub natural gas spot price is projected to average $9.27 per Mcf in 2008. The projected 2009 price is $6.82 per Mcf. That compares with $8.17 in the previous Outlook, released in October.

Natural gas consumption in 2008 is projected to be higher in every sector except for electric power, led by 4- and 3-percent growth in the residential and commercial sectors, respectively.

A cooler summer, especially in the upper Midwest and Northeast regions, resulted in residential electricity consumption falling 0.5 percent this year. The economic slowdown will affect consumption in all sectors during 2009, particularly the industrial sector, which is now expected to decline by 2.5 percent. That contrasts with a 0.2 percent decline projected in last month’s report.

Although electric power sector coal consumption for the first half of 2008 grew by 1.3 percent, slow growth in summer electricity consumption is expected to keep annual growth flat in 2008. Weak economic growth coupled with projected increases from other generation sources (nuclear, natural gas, petroleum and wind), are forecast to lead to a 0.4 percent decline in electric-power-sector coal consumption in 2009.