Taking the Long View: Energy Through 2040
- U.S. energy supply will be limited by exports
- Efficiency gains will limit demand growth
- U.S. crude oil supply likely to be flat
- Natural gas use expected to rise
The Matrix
Profound changes in the shape of the energy markets have been underway for some time. The Energy Information Administration’s 2017 Annual Energy Outlook developed long range possibilities in this year’s report. The emergence of shale fracturing in the United States is perhaps the most commonly noted change.
Other aspects of energy balances are changing too. Supply is being impacted by robust exports of both domestic crude oil and petroleum products. At the same time, imports of crude oil in particular are falling.
Another negative factor for traditional hydrocarbon usage is transition to renewable sources. Wind and solar power are moving out of infant industry status, benefiting from efficiency. They benefit also from preferred treatment by federal and state entities.
Less commonly noted is the demand situation. Under almost any situation, demand is not expected to grow through 2040. Natural gas consumption is expected to expand, reflecting demand in the industrial and electric power sectors. Petroleum use is projected to remain flat. EIA expects energy efficiency gains to offset growth in transportation and industrial activity.
The effect of these changes on price is, of course, problematic. Supply of crude oil is likely to remain flat according to EIA’s base case. But price can be influenced by demand as well. And growing efficiencies could offset the impact of expanding population and per capita gross domestic product. Both of these measures are expected to increase over time. Population is projected to attain 375 million people by 2040. Gross domestic product is likely to be $70,000 per person at the end of this period.
These changes are almost certain to affect the business of individual energy entrepreneurs. Distributed power through home solar could cut into demand for heating fuels. And natural gas demand is expected to increase more than other fuels.
Energy companies would do well to consider their current business models in light of these expectations. Are there ways to secure new business other than by cannibalizing accounts of competitors? Could home heating oil dealers find new outlets in the commercial sector? Is there a place for natural gas or even electricity sales in the changing energy business?
Supply/Demand Balances
Supply/demand data in the United States for the week ending October 20, 2017 were released by the Energy Information Administration.
Total commercial stocks of petroleum decreased 12.2 million barrels during the week ending October 20, 2017.
Draws were reported in stocks of gasoline, fuel ethanol, K-jet fuel, distillates, residual fuel oil, and propane. A build was reported in stocks of other oils.
Commercial crude oil supplies in the United States increased to 457.3 million barrels, a build of 0.9 million barrels.
Crude oil supplies increased in three of the five PAD Districts. PAD District 3 (Gulf Coast) crude oil stocks rose 0.6 million barrels, PADD 4 (Rockies) stocks advanced 0.1 million barrels, and PADD 5 (West Coast) stocks increased 1.6 million barrels. PAD District 1 (East Coast) crude oil stocks fell 0.1 million barrels and PADD 2 (Midwest) stocks declined 1.4 million barrels.
Cushing, Oklahoma inventories decreased 0.3 million barrels from the previous report week to 63.7 million barrels.
Domestic crude oil production increased 1.101 million barrels daily to 9.507 million barrels per day from the previous report week.
Crude oil imports averaged 8.123 million barrels per day, a daily increase of 640,000 barrels. Exports rose 126,000 barrels daily to 1.924 barrels per day.
Refineries used 87.8 per cent of capacity, an increase of 3.3 percentage points from the previous report week.
Crude oil inputs to refineries increased 586,000 barrels daily; there were 16.025 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, rose 609,000 barrels daily to 16.306 million barrels daily.
Total petroleum product inventories saw a decrease of 13.1 million barrels from the previous report week.
Gasoline stocks fell 5.5 million barrels from the previous report week; total stocks are 216.9 million barrels.
Demand for gasoline increased 177,000 barrels per day to 9.314 million barrels daily.
Total product demand increased 868,000 barrels daily to 20.010 million barrels per day.
Distillate fuel oil supply fell 5.2 million barrels from the previous report week to 129.2 million barrels. National distillate demand was reported at 4.101 million barrels per day during the report week. This was a weekly increase of 625,000 barrels daily.
Propane stocks declined 1.2 million barrels from the previous report week to 77.6 million barrels. Current demand is estimated at 1.177 million barrels per day, an increase of 242,000 barrels daily from the previous report week.
Natural Gas
According to the Energy Information Administration:
Weekly net injections fall short of the five-year average. Net injections into storage totaled 64 Bcf for the week ending October 20, compared with the five-year (2012–16) average net injection of 75 Bcf and last year’s net injections of 74 Bcf during the same week. Decreased power demand for natural gas contributed to increased net injections compared with the previous report week
So far during the 2017 refill season, net injections into storage are 16% lower than the comparable five-year average—1,659 Bcf during the 2017 refill season compared with the five-year average increase of 1,970 Bcf. If net injections continue at 16% lower than the five-year average for the remaining three weeks, working gas stocks will reach 3,782 Bcf by the end of the refill season.
Natural gas consumption is expected to rise throughout EIA’s projection period until 2040. Efficiencies in production from shales have lowered prices, resulting in expanded consumption and exports. Development in the Marcellus and Utica plays will make the East a natural target for demand growth.
Futures trading involves significant risk and is not suitable for everyone. Transactions in securities futures, commodity and index futures and options on future markets carry a high degree of risk. The amount of initial margin is small relative to the value of the futures contract, meaning that transactions are heavily “leveraged”. A relatively small market movement will have a proportionately larger impact on the funds you have deposited or will have to deposit: this may work against you as well as for you. You may sustain a total loss of initial margin funds and any additional funds deposited with the clearing firm to maintain your position. If the market moves against your position or margin levels are increased, you may be called upon to pay substantial additional funds on short notice to maintain your position. If you fail to comply with a request for additional funds within the time prescribed, your position may be liquidated at a loss and you will be liable for any resulting deficit. Past performance may not be indicative of future results. This is not an offer to invest in any investment program.
Powerhouse is a registered affiliate of Coquest, Inc.
Was this helpful? We’d like your feedback.
Please respond to [email protected]
Copyright © 2017 Powerhouse, All rights reserved.
