Energy use fell in 2020 but expected to rise in 2021, 2022
by January 12, 2021 3:36 pm 2,210 views
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U.S. energy consumption is expected to rise in 2021 and 2022 along with the GDP after falling in 2020, but the 2022 consumption level is projected to remain below the 2019 level, according to the U.S. Energy Information Administration (EIA).
The EIA released Tuesday (Jan. 12) the January Short-Term Energy Outlook that includes the first forecasts for 2022 and noted the pandemic and the success of the vaccination programs are expected to continue to affect energy use. Reduced economic activity and changes to consumer behavior in response to the pandemic caused energy demand and supply to fall in 2020.
U.S. GDP fell by 3.5% in 2020 and is expected to rise by 4.2% in 2021 and 3.8% in 2022, according to IHS Markit. The rising GDP contributes to EIA’s forecast of rising total energy use in the United States during 2021 and 2022. Total U.S. energy consumption fell by 7.8% in 2020 and will rise by 2.6% in 2021 and 2.5% in 2022, reaching 97.3 quadrillion British thermal units (quads), or 3 quads less than in 2019, according to the EIA.
International benchmark Brent crude oil spot prices are expected to be an average of $53 per barrel in 2021 and 2022, up from an average of $42 per barrel in 2020.
Global consumption of petroleum and liquid fuels fell by 9 million barrels per day to 92.2 million barrels per day in 2020, from 2019. The consumption is expected to rise by 5.6 million barrels per day in 2021 and 3.3 million barrels per day in 2022.
Crude oil production from the Organization of the Petroleum Exporting Countries (OPEC) is expected to rise to 27.2 million barrels per day in 2021, from 25.6 million barrels per day in 2020. The expected growth can be attributed to OPEC’s planned increases in production and continued rise in Libya’s production. OPEC and partner countries (OPEC+) announced Jan. 5 they will maintain the previously approved production increase of 0.5 million barrels per day. Also, the most recent OPEC+ agreement includes production increases from Russia and Kazakhstan in February and March. However, voluntary cuts by Saudi Arabia for February and March will lead to lower overall OPEC+ production in early 2021. OPEC crude oil production is projected to rise by 1.1 million barrels per day in 2022.
Global liquid fuels inventories are expected to fall at a rate of 0.6 million barrels per day in 2021 and 0.5 million barrels per day in 2022.
U.S. regular gasoline retail prices were an average of $2.18 per gallon in 2020, down from $2.60 per gallon in 2019. The prices are expected to rise to an average of $2.40 per gallon in 2021 and $2.42 per gallon in 2022. U.S. diesel fuel prices are expected to rise to $2.71 per gallon in 2021 and to $2.74 per gallon in 2022. Diesel fuel prices fell to $2.55 per gallon in 2020, from $3.06 per gallon in 2019.
U.S. crude oil production is expected to fall to 11.1 million barrels per day in 2021 before rising to 11.5 million barrels per day in 2022. The production declined from the record level of 12.2 million barrels per day in 2019 to 11.3 million barrels per day in 2020.
“Recent crude oil price increases and rig additions will contribute to crude oil production in the lower 48 states, which is mostly tight oil production, beginning to rise again in the second quarter of this year,” said EIA Administrator Linda Capuano.
U.S. liquid fuels consumption fell by 12%, or by 2.5 million barrels per day, to 18.1 million barrels per day in 2020, from 2019. U.S. liquid fuels consumption is projected to rise to 19.5 million barrels per day in 2021 and to 20.5 million barrels per day in 2022, nearly equal to the 2019 level.
“In 2020, the United States exported more crude oil and petroleum products than it imported on an annual basis for the first time in EIA’s data series that dates back to 1949,” Capuano said. “EIA expects the United States to return to importing more crude oil and petroleum products than it exports on an annual basis in 2021 and 2022.”
NATURAL GAS RISE
Henry Hub natural gas spot prices are expected to rise to an annual average of $3.01 per million British thermal units in 2021, from $2.03 per million British thermal units in 2020. Capuano attributed the nearly $1 rise to reduced natural gas production, and this will lead to reduced natural gas use in the electric power sector as other fuel sources become more competitive. The prices are projected to increase to $3.27 per million British thermal units in 2022.
U.S. working natural gas in storage is expected to be 1.6 trillion cubic feet by the end of March, and this is 12% lower than the 2016-20 average. The amount in storage was more than 3.9 trillion cubic feet at the end of October 2020, and 5% more than the five-year (2015-19) average and the fourth-highest level on record for the end of October. The declines in U.S. natural gas production this winter compared with last winter are expected to more than offset the decreases in natural gas consumption and will contribute to inventory withdrawals outpacing the five-year average for the remainder of the winter, which ends in March.
U.S. natural gas consumption is projected to fall by 2.8% in 2021 and by 2.1% in 2022. Most of the decrease can be attributed to less natural gas use in the power sector, which is expected to decline because of rising natural gas prices. The declines will be partly offset by rising natural gas use in other sectors. Natural gas consumption fell by 2.5% to 83.1 billion cubic feet per day in 2020, from 2019.
U.S. dry natural gas production is expected to fall by 2.8% to 88.2 billion cubic feet per day in 2021, from 90.8 billion cubic feet per day in 2020. The production fell 2.5% from 2019. It is expected to rise to 89.7 billion cubic feet per day in 2022.
“EIA expects continued growth in U.S. natural gas exports through 2022, driven by increased liquefied natural gas exports as international natural gas prices rise,” Capuano said. “EIA forecasts liquefied natural gas exports will increase to 8.5 billion cubic feet per day in 2021 and 9.2 billion cubic feet per day in 2022. EIA forecasts that 2022 will be the first year that more natural gas is exported from the United States as liquefied natural gas rather than by pipeline.”
ELECTRICITY INCREASE
Total consumption of electricity in the United States is projected to rise by 1.5% in 2021 after falling by 4% in 2020. Retail sales of electricity to the commercial and industrial sectors fell by 6% and 7.9%, respectively, in 2020. Commercial and industrial electricity use is expected to rise by 0.9% and 1.2%, respectively, in 2021. Social distancing guidelines have contributed to people spending more time at home and leading to a rise in residential electricity use. In 2020, retail sales of electricity to the residential sector rose by 1.3% despite a mild winter earlier in the year. Residential electricity use is projected to rise by 2.4% in 2021 as colder winter weather leads to more heating demand. Total electricity consumption is projected to rise by 1.5% in 2021 and by 1.7% in 2022, Capuano said.
The share of U.S. electric power sector generation from natural gas will fall from 39% in 2020 to 36% in 2021 and to 34% in 2022 as a result of higher natural gas fuel costs and increased generation from renewable energy sources. The share of generation from coal is expected to rise from 20% in 2020 to 22% in 2021 and 24% in 2022, which is close to its share in 2019. Electricity generation from renewable sources is expected to increase from 20% in 2020 to 21% in 2021 and 23% in 2022. The nuclear share is expected to decline from 21% in 2020 to 20% in 2021 and 19% in 2022.
Electricity generation capacity from renewable energy sources is expected to continue to rise over the next two years. Solar capacity will rise the fastest, according to the EIA forecast. Large-scale solar capacity growth in gigawatts will exceed wind growth for the first time in 2021.
In 2021, coal production is expected to rise by 12% to 603 million short tons because of a forecast 41% increase in natural gas prices for electricity generators, making coal more competitive in the electric power sector. Coal production is expected to increase to 628 million short tons in 2022. Low natural gas prices reduced demand for coal in the electric power sector in 2020, and this led to a 24% decline in production, Capuano said.
Total energy-related carbon dioxide (CO2) emissions will fall by 4.7% in 2021 and by 3.2% in 2022. The emissions fell by 11.1% in 2020. The 2022 emissions will be 3.9% lower than 2019 levels.