Oil balances growing China economy with lower price projections

Let’s Party like Its 15000 DOW

For natural gas, Adam Siminski says that "Heading into the summer, EIA expects U.S. natural gas production to be slightly higher than last year's output. However, because natural gas prices will be higher, projected gas use by power plants to generate electricity for meeting cooling demand will be lower this summer compared with last year's record-high levels. Injections of natural gas in underground storage this summer are expected to be nearly 50% higher than last year at 2.1 trillion cubic feet.”

Fleet Owner Magazine writes that the EIA began releasing its annual Energy Outlook study for 2013 this week. The study is being released in stages from April 15 to May 2, beginning with legislation and regulations and ending with a look at the impact of natural gas.

The EIA is quick to point out that "projections by the U.S. Energy Information Administration are not statements of what will happen but of what might happen, given the assumptions and methodologies used for any particular case. The Reference case projection is a business-as-usual estimate, given known market, demographic and technological trends.”  That said, there are some very interesting tidbits of information and possible future scenarios outlined. For starters, no matter what individual fleets may have experienced recently concerning fuel prices, the study reports that total U.S. energy expenditures will decline relative to GDP.  The projected ratio of energy expenditures to GDP will average 6.8% from 2011 to 2040, which is below the historical average of 8.8% from 1970 to 2010.The Outlook also envisions a significant decline in U.S. energy use per capita. "The decline in energy use per capita is brought about largely by gains in appliance efficiency and an increase in vehicle efficiency standards by 2025,” the Outlook projects.  When it comes to transportation, the Outlook notes that "LDVs [light-duty vehicles] that use diesel, other alternative fuels, hybrid-electric, or all-electric systems [will] play a significant role in meeting more stringent GHG [greenhouse gas] emissions and CAFE standards over the projection period. Sales of such vehicles [will] increase from 20% of all new LDV sales in 2011 to 49% in 2040.” In other words, nearly half of all light-duty vehicles could be running on so-called "alternative power” in just less than 30 years. Natural gas, the current alternative power darling of the marketplace, really is the fastest-growing fuel in the transportation sector, according to the Outlook, with an average annual projected growth rate of 11.9% from 2011 to 2040.

The Outlook also sees heavy-duty vehicles leading the natural gas adoption march with natural gas fuel consumption  increasing "from almost zero in 2011 to more than 1 quadrillion Btu in 2040, at an average annual growth rate of 14.6%”-- not insignificant.

"Although vehicle uses currently account for only a small part of total U.S. natural gas consumption,” the Outlook finds, "the projected percentage growth in natural gas demand by vehicles is the largest percentage growth in the projection.”

Dow Jones wrote that Natural gas futures settled at their lowest level in a month Tuesday as traders focus on waning demand for gas-fueled heating and brace for another big increase in gas stockpiles later this week.   Natural gas for June delivery settled down 9.1 cents, or 2.3%, to $3.920 a million British thermal units on the New York Mercantile Exchange.   That's the contract's lowest finish since April 3 and the first time settling below the $4 psychological threshold since April 4.

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About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.


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