The U.S. Energy Information Administration (EIA) released its Short Term Energy Outlook (STEO), noting expectations for 2023 and a first look at expectations for 2024.
Crude oil is forecast to average $83 a barrel in 2023 and $78 in 2024. The predictions include an assumption of increased petroleum demand, but that increased U.S. production will offset the demand. The report states, “U.S. growth is driven by increases in oil production in the Lower 48 states-mostly in the Permian region — as well as a combination of increases to productions of hydrocarbon gas liquids and biofuels, which together account for about 40% of U.S. liquid fuels production growth in 2023 and 2024.”
EIA forecasts call for gasoline and diesel prices to soften from 2022 levels, with a 2023 projected average of $3.30 a gallon for gasoline and $4.20 for diesel. 2024 should see further softening to $3.10 a gallon for gasoline and $3.70 for 2024.
A key driver bringing down gas prices in the U.S. is increasing refining production in response to improved crack spreads throughout 2022.
According to the EIA, natural gas prices should rise to $5.00 per million British thermal units (MMBtu). While temperatures and weather are always volatile and affect natural gas prices, demand should increase as the Freeport LNG terminal exports come back online. Last June a fire at a Freeport LNG liquefaction plant on the Texas Gulf Coast led to a facility shutdown and about 17% of U.S. LNG export capacity going offline. While export demand will increase, EIA expects natural gas production to keep up.
On the O&G front, a January Wall Street Journal article highlighted the rebound of oil and gas companies. The paper notes a “mix of events, from the Russian invasion of Ukraine to the U.S. economic recovery; fossil fuels are showing surprising resilience, despite President Biden’s push to transition to clean energy and the industry’s history of boom-bust investing and heavy reliance on debt.” Louisiana has been the beneficiary due to the productivity of the Hayesville basin.
Shifting north, E&E news reported that New York Governor Kathy Hochul is pushing to eliminate fossil fuel heating equipment in the state. During her state of the state address, Hochul called for legislation which would phase out the sales of fossil fuel heating equipment for residential buildings by 2030 and for commercial buildings by 2035.
She further called for all new construction of residential properties to be all electric by 2025 and new construction of commercial properties by 2030.
While transitions to green energy will continue, policy makers and elected officials across both parties are beginning to openly discuss the notion that fossil fuels are going to remain a significant part of the energy platform for the foreseeable future.
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