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If the latest numbers from the U.S. Energy Information Administration say anything certain about the country’s immediate economic and energy future, it is that COVID-19’s continued economic fallout makes nearly all predictions uncertain.
The federal agency’s Jan. 12 short-term energy outlook, the first to include forecasts into 2022, “remains subject to heightened levels of uncertainty because responses to COVID-19 continue to evolve,” the report said, noting that economic assumptions are the bedrock of its statistical forecasts. The success of the current vaccination push is another variable.
But generally, macroeconomic assumptions point to a likely increase in U.S. real gross domestic product in 2021 after a 3.5% decrease in 2020, according to IHS Markit and EIA global analyses based on forecasts from Oxford Economics. And general energy trends point to a significant rise in natural gas prices and a seemingly unlikely revival in the market for coal over the next couple of years.
Energy use, which plunged 7.8% in 2020 as the pandemic raged, is expected to rise by 2.6% this year and 2.5 percent in 2022, again depending on what course the virus takes.
Petroleum prices and production are expected to rebound, with Brent crude spot prices projected at $53 a barrel in 2021 and 2022; that compares to a pandemic-crunched $42 a barrel in 2020. Global consumption of petroleum and liquid fuels averaged 9.2 million barrels a day in 2020, down about 10% from the year before. That is expected to improve by 5.6 million barrels a day this year and 3.3 barrels a day in 2022.
Gasoline prices are expected to rise from a 2020 average of $2.18 per gallon nationwide to $2.40 this year and $2.42 in 2022. Diesel prices, which averaged $2.55 per gallon in 2020, down from $3.06 in 2019, are expected to average $2.71 per gallon this year and $2.74 the year after.
Natural gas use was down last year by 2.5% from 2019, and gas in storage was at its fourth-highest level on record. The EIA forecasts that U.S. production will fall over the winter enough to offset declines in consumption, and that could drive prices up. Prices on the Henry Hub are expected to average $3.01 per million British thermal units this year, up nearly a dollar per million BTUs. That price is expected to reach $3.27 by 2022, driving forecasts that utilities will put the brakes on natural gas-fired generation because of rising prices.
“EIA expects the share of U.S. electric power sector generation from natural gas will decline from 39% in 2020 to 36% in 2021 and 34% in 2022 in response to significantly higher natural gas fuel costs and increased generation from renewable energy sources,” the report said. “Coal’s forecast share of electricity generation will rise from 20% in 2020 to 22% in 2021 and 24% in 2022, which is close to its share in 2019.”
Electricity use plunged 4% in 2020, thanks largely to COVID-19, but consumption is expected to rise by 1.5% this year and 1.7% in 2022. The rebound is expected to include the commercial and industrial sectors of the economy, which say 6% and 7.9% declines in power use, respectively, in 2020. The EIA expects commercial electricity use in 2021 to rise by 0.9% and industrial electricity use to rise by 1.2%.
Meanwhile, home electricity use was up last year as more people worked and attended school sessions at home. Retail residential electricity sales were 1.3% higher despite a mild winter in early 2020, and forecasts expect residential use will rise by 2.4% in 2021 as colder winter weather leads to more heating demand. Total forecast electricity consumption in 2022 will rise by 1.7%, the EIA says.
“During the next two years, EIA expects electricity generation capacity from renewable energy sources to continue growing,” the report added. “Although EIA expects both wind and solar capacity growth, solar capacity grows at a faster rate in the forecast. Based on EIA survey data, large-scale solar capacity growth in gigawatts (GW) will exceed wind growth for the first time in 2021.”
The agency predicts that U.S. coal production will increase 12% this year as gas prices rise, making coal more competitive. The coal sector took a beating in 2020, with production off 24%. Corresponding to that increase, carbon dioxide emissions are expected to rise over the next two years after an 11.1% decline in 2020.