Summer electricity demand, fuel prices to be lower amid COVID-19 pandemic

by Jeff Della Rosa ([email protected]) 559 views 

Summer electricity consumption in the United States is expected to fall to the lowest level in 11 years, according to the U.S. Energy Information Administration (EIA).

Meanwhile, gasoline prices are not expected to spike this summer as they have in the past, according to a AAA report.

The lower electricity consumption and a softer rise in gasoline prices this summer can be attributed to the COVID-19 (coronavirus) pandemic.

U.S. electricity demand is expected to fall 5% to 998 billion kilowatt-hours this summer (June to August), from the same period in 2019, and this is the lowest level of electricity consumption since 2009. Most of the decline in retail electricity sales will be in the commercial and industrial sectors in which demand is expected to fall 12% and 9%, respectively, from summer 2019. Residential electricity sales are expected to rise 3% this summer because more people are working from home and following social or physical distancing guidelines.

Weather is often a primary factor in determining electricity demand in the residential and commercial sectors. The number of U.S. cooling degree days, which indicates air conditioning demand, is projected to fall 1% this summer, from the same period in 2019, according to the National Oceanic and Atmospheric Administration.

Social distancing guidelines are expected to contribute to more people spending more time at home than usual this summer, according to the EIA. Also, many people who worked in offices are working from home, and this has shifted electricity demand from the commercial sector to the residential sector.

The EIA’s electricity consumption forecasts are based on macroeconomic indicators released by IHS Markit. It projects that non-farm employment will fall 13% in 2020, while the electricity-weighted industrial production index declines by 12%.

Electricity generation from coal is expected to be lower than last summer because of the lower electricity demand. Coal-fired plants are projected to generate 178 billion kilowatt-hours between June and August, down from 272 billion kilowatt-hours last summer. The amount of electricity generated by coal is projected to fall to 17% this summer, from 24% in the same period in 2019. The amount of electricity produced by nuclear generation is expected to be 207 billion kilowatt-hours this summer.

Natural gas-fired plants will generate about 467 billion kilowatt-hours this summer, up from 460 billion kilowatt-hours last summer. Low natural gas prices will make natural gas more economical to use than coal, according to the EIA. The amount of electricity generated by natural gas will rise to 44% this summer, from 41% last summer.

The renewable energy share of electricity generation is expected to increase this summer. Wind and solar capacity is expected to be added, largely in the Midwest and Texas, and will contribute to the rise. The amount of electricity produced by wind is expected to rise 7% this summer, while the amount attributed to utility-scale solar increases by 3%.

Since mid-May, gasoline demand has risen 18% to 7.9 million barrels per day, according to the EIA. The slow, steady rise in demand has contributed to a 13% increase in retail gasoline prices since then, according to the AAA. As of mid-June, the national average was $2.10, up 7 cents from the previous week and 24 cents from May but 59 cents less than the same time in 2019.

“As Americans drive more, they are re-fueling gasoline demand levels, which is helping to lift pump prices,” said Jeanette Casselano, AAA spokeswoman. “Higher demand will contribute to increasing gas prices in the coming weeks, but they aren’t going to spike to typical summer prices. That’s because demand won’t be sufficient enough to drive down stocks levels. Gasoline stocks sit at a significant surplus of nearly 24 million (barrels) year-over-year.”

Average gasoline prices rose above $2 per gallon in the first week of June after being below that amount for 66 days, according to the AAA. In the same week over the past five years, gas prices have been an average of $2.81 per gallon. Prices for the first week of June were the lowest since 2004, Casselano said.

“As crude oil prices trend higher and gasoline demand increases, Americans will see gas prices push more expensive, but this summer will be cheaper than last,” she added.

In Arkansas, a regular gallon of gas was $1.81, up 3 cents from last week and 28 cents from May but down 53 cents from June 2019.

“Of the major metropolitan areas surveyed in Arkansas, drivers in Texarkana are paying the most on average at $1.93 while drivers in Little Rock-North Little Rock are paying the least at $1.76 per gallon,” said Nick Chabarria, AAA spokesman. “As drivers in Arkansas and nationwide return to the roadways, prices will follow increased demand. AAA expects drivers will see prices at the pump increase another 10 to 15 cents throughout the summer.

“However, motorists can still look forward to the cost to fill up to stay below typical summer amounts,” Chabarria added. “The current average in Fayetteville-Springdale-Rogers is $1.82 per gallon. A driver with an average 12-gallon tank can fill up for $21.84. On this day last year, it would have cost the same driver $28.08 to fill up at $2.34 per gallon.”