# Presentation: 171037

## National Capital Area Chapter United States Association forEnergy Economics  October 20, 2006Washington, DC

**Guy F. Caruso**
**Administrator,**
**Energy Information Administration**

***2006-2007 Winter Fuels Outlook***

## Winter 2006/07 expected to be 6 percent colder than last winter, but slightly warmer than normal

**U.S. heating degree-days population-weighted**

***Winter 2006/07 expected to be 6 percent colder than last winter, but slightly warmer than normal***

- NOAA

## World oil consumption growth is expected to remain strong

**Oil Demand **
**Growth**

**World Oil Demand**

- History

- Projections

*Short-Term Energy Outlook, October 2006*

**million barrels per day**

## Growth in U.S. petroleum products consumption is expected to be strong in 2007

**-0.4%**

**-0.2%**

**1.7%**

- History

- Projections

*Short-Term Energy Outlook, October 2006*

**thousand barrels per day**

## World oil surplus production capacity is expected to increase slightly but remain at a low level

***World oil surplus production capacity is expected to increase slightly but remain at a low level***

- History

- Projections

*Short-Term Energy Outlook, October 2006*

**million barrels per day**

## OECD commercial oil stocks are expected to tighten

**Previous 5-Year Min/Max Range**

- History

- Projections

*Short-Term Energy Outlook, October 2006*

**days of supply**

## U.S. crude oil stocks are at very high levels

**Previous 5-Year Min/Max Range**

- History

- Projections

*Short-Term Energy Outlook, October 2006*

**million barrels**

## Recently declining crude prices are projected to increase during winter, but not to last winter’s highs

**   **

_** **_

- Crude prices often
- decline just
- prior to winter

- Projections

- History

*Short-Term Energy Outlook, October 2006*

**dollars per barrel**

## Many factors may affect oil prices in upcoming months

**UN deadline for Iran passed **
**Israel-Lebanon ceasefire**

**OPEC Meeting: Quotas unchanged **
**Prudhoe Bay production back online**
** ****Revised NOAA hurricane season forecast**
** ****Summer driving season ends**

**Official OPEC Meeting**
**Iran Elections**

- Nigeria elections

**Hurricane season**

- Buzzard (UK) & Sakhalin-I (Russia) oil projects expected to begin production.

***Many factors may affect oil prices in upcoming months***

**Summer driving season**

**Peak winter heating**

*Short-Term Energy Outlook, October 2006*

**dollars per barrel**

## Retail heating oil prices are projected to show little change from last winter

**Oct 2006 – March 2007 Average**
**10% Colder = $2.49/gal**
**Base Case = $2.46/gal**
**10% Warmer = $2.43/gal**

- Projections

- History

*Short-Term Energy Outlook, October 2006*

**cents per gallon**

## U.S. natural gas consumption growth is expected to resume

***U.S. natural gas consumption growth is expected to resume***

- History

- Projections

*Short-Term Energy Outlook, October 2006*

## U.S. natural gas in storage is projected to remain above historical averages, even in cold weather case

**deviation from 5-year average, billion cubic feet**

- Projections

- History

*Short-Term Energy Outlook, October 2006*

## Natural gas prices are expected to be significantly lower than last winter

***Natural gas prices are expected to be significantly lower than last winter***

**Henry Hub Spot Price****10% Colder = $8.97/mcf**
**Base Case = $7.39/mcf**
**10% Warmer = $5.89/mcf**

**Residential Price****10% Colder = $13.05/mcf**
**Base Case = $12.23/mcf**
**10% Warmer = $11.46/mcf**

**Residential Price**

**Henry Hub Spot Price**

- History

*Short-Term Energy Outlook, October 2006*

- Projections

**Dollars per thousand cubic feet**

## Natural gas heating bills are projected to be lower for all regions this winter

| Percent Change from Last Winter (Projected) |  |  |  |
| --- | --- | --- | --- |
|  | Consumption | Average Price | Total Expenditures |
| West | + 2 % | - 12 % | - 10 % |
| South | + 6 % | - 19 % | - 14 % |
| Midwest | + 4 % | - 18 % | - 14 % |
| Northeast | + 7 % | - 15 % | - 10 % |
| U.S. Average | + 5 % | - 16 % | - 13 % |

*Short-Term Energy Outlook, October 2006*

## Winter heating oil expenditures projected to increase for all regions

| Percent Change from Last Winter (Projected) |  |  |  |
| --- | --- | --- | --- |
|  | Consumption | Average Price | Total Expenditures |
| West | + 2 % | - 2 % | + 0 % |
| South | + 4 % | + 0 % | + 5 % |
| Midwest | + 5 % | + 0 % | + 6 % |
| Northeast | + 6 % | + 1 % | + 7 % |
| U.S. Average | + 6 % | + 0 % | + 6 % |

*Short-Term Energy Outlook, October 2006*

## Winter electricity expenditures are projected to increase for all regions

| Percent Change from Last Winter (Projected) |  |  |  |
| --- | --- | --- | --- |
|  | Consumption | Average Price | Total Expenditures |
| West | + 1 % | + 10 % | + 11 % |
| South | + 3 % | + 3 % | + 6 % |
| Midwest | + 3 % | + 5 % | + 8 % |
| Northeast | + 5 % | + 5 % | + 10 % |
| U.S. Average | + 3 % | + 5 % | + 7 % |

*Short-Term Energy Outlook, October 2006*

## Average winter fuel expenditures are expected to be lower for natural gas and propane than last year, slightly higher for heating oil and electricity

- Winter = October 1 through March 31.  Expenditures are based on typical per household consumption adjusted for weather. Warmer and colder cases represent 10% decrease or 10% increase in heating degree-days.

*Short-Term Energy Outlook, October 2006*

## EIA, like most forecasters, has underpredicted oil prices during the last 3 years

**Mean Average Percent Error**
- EIA                   16.2%
- Consultant A     19.1%
- Consultant B     15.4%

***EIA, like most forecasters, has underpredicted oil prices during the last 3 years***

**Error in 6-month ahead forecast, dollars per barrel**

## The Outlook Shows ...

- The average U.S. household will pay about $45 less for heating this winter.
- Lower expenditures are driven by lower prices for natural gas which offset the expected increase in consumption brought about by the projected colder weather.
- Under the baseline forecast, natural gas expenditures could be about $119, or 13 percent, lower for the average U.S. household this winter.
- Heating oil expenditures are projected to be about $91, 6 percent, higher for the average U.S. household this winter. Electricity expenditures are forecasted to be $58, 7 percent, higher the average U.S. household this winter.
- A colder winter could substantially raise estimated expenditure increases.

## www.eia.doe.gov

**guy.caruso@eia.doe.gov**

**   ****Periodic Reports**
***   ******Petroleum Status and Natural Gas Storage Reports*****, weekly*****  ***
***   ******Short-Term Energy Outlook*****, monthly**
***   ******Annual Energy Outlook 2006*****, February 2006**
**	****next reference case, November 2006**
***   ******International Energy Outlook 2006*****, June 2006**
**   ****Examples**** of ****Special Analyses**
**    “****Economic Effects of High Oil Prices,” *****Annual Energy Outlook 2006***
**    *****Analysis of Oil and Gas Production in the Arctic National Wildlife Refuge*****, **
**           ****March 2004**
**    *****The Global Liquefied Natural Gas Market: Status and Outlook, *****December 2003**
**    “****Restricted Natural Gas Supply Case,” *****Annual Energy Outlook 2005***
***    ***
**    **

**www.eia.doe.gov**