EIA forecasts 1% decline in US energy demand this year

The US Energy Information Administration Tuesday projected total US energy use will decline a full 1% this year to 98.5 quadrillion btu, reflecting the “precarious worldwide economic situation.”

In October, the government agency was predicting a 0.5% decline in total energy demand from 2000, the first absolute decline since the early 1990s. EIA said in its November short-term energy outlook that uncertainty has generally dampened expectations for strong energy demand growth in the near term.

Natural gas demand is expected to be down 3.3% this year. Industrial demand is expected to decline 13.5%, compared to 2000. Gas demand for use in power plants is projected to grow 3.3% this year, compared to 9.8% last year.

The EIA said a recent rally in gas prices above $3/Mcf doesn’t appear sustainable assuming normal weather and taking into account the very weak condition of the US industrial manufacturing sector and high levels of gas in storage. By the end of February 2002, working gas in underground storage is projected to be over 60% above the level experienced last February.

“Therefore, we believe that some correction is likely and that prices over the next 5 months should remain in the $2-$3 range, with prices easing toward the lower end of that range during the off-season in 2002,” EIA forecasters said.

In the first quarter of 2002, industrial demand is projected to rise as a result of a gradually reviving economy and a changing differential between gas and oil prices. While prices have swung back in favor of using natural gas, EIA said the depressed natural gas demand situation is not expected to improve appreciatively until 2002 due to lowered assumptions about economic growth for this year.

The agency forecast continued steady reductions in drilling are likely to produce conditions favorable to substantial strengthening of natural gas prices going into 2003, especially if the US economy stages a solid economic recovery beginning by mid 2002.

Coal prices are expected to increase slightly this year, after years of annual price declines, according to the EIA. But coal prices should continue to recede next year on a rise in coal stockpiles and low gas prices, it said.

Industrial electricity consumption is expected to fall 6.4% this year, compared to 2000, and to stabilize in 2002 along with the economy. In 2001, growth in residential and commercial demand for electricity is expected to be 2.7% and 3.3% respectively, due to continued expansion of the customer base and weather effects, EIA said. The commercial sector is expected to be weaker next year because of the lack of weather effects and very slow growth in commercial employment.

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