# Presentation: 553470

## Short-Term andWinter Fuels Outlook

**Guy F. Caruso**
**Administrator**
**Energy Information Administration**
**New York Energy Forum**
**New York, NY**
**October 16, 2007**
**www.eia.doe.gov**

## Tight global oil market conditions are projected to continue through 2008.

- OPEC production decisions will continue to influence the oil market situation.
- Low surplus production capacity of 2 to 3 million barrels per day, concentrated in Saudi Arabia, weakens the market's ability to respond to supply disruptions.
- Oil prices likely to remain high at least through 2008.
- Many uncertainties could alter the outlook and create volatility in global oil markets.

## Crude oil prices, having recently exceeded $80 per barrel, are projected to decline slowly over the forecast.

***Crude oil prices, having recently exceeded $80 per barrel, are projected to decline slowly over the forecast.***

- WTI = West Texas Intermediate crude oil.

## OPEC cut crude oil production last fall to firm world oil markets.

**Change in Production Since 3****rd**** Quarter 2006**
**(million barrels per day)**

## OECD commercial stocks have fallen from record highs to near-normal levels.

## Market balance may loosen slightly in 2008.

## OPEC surplus production capacity remains low.

## Dollar-based economies have experienced higher oil prices than those with other currencies.

**$ per barrel**

**€ ****per barrel**

**$79.91**

**€****57.50**

## Multiple and hard-to-predict uncertainties drive the oil market forecast.

**Weather**

**Non-OPEC Supply Growth**

**Iran**

**Iraq**

**Economic Growth**

**OPEC Production Decisions**

**Nigeria**

**Venezuela**

**Value of U.S. Dollar**

**Refinery Outages**

## U.S. average fuel expenditures are expected to be higher for all fuels this winter, October – March.

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

## Retail gasoline prices are projected to be higher in 2008.

**Average Summer Price**
**        ****$2.84 / gallon**
**        ****$2.93 / gallon**
**        ****$2.97 / gallon**

- Summer = April 1 through September 30.**  **

## Winter 2007-2008 is expected to be 4 percent colder than 2006-2007 but still 2 percent warmer than 30-year average.

***Winter 2007-2008 is expected to be 4 percent colder than 2006-2007 but still 2 percent warmer than 30-year average.***

## Natural gas prices are expected to be higher than last winter.

**Henry Hub Winter Average Spot Price**
**10% Colder = $8.71/ mcf**
**Base Case = $7.79/ mcf**
**10% Warmer = $7.05/ mcf**

**Dollars **
**per **
**Thousand **
**Cubic Feet **
**(mcf)**

**Residential Winter Average Price**
**10% Colder = $13.53/ mcf**
**Base Case = $13.14/ mcf**
**10% Warmer = $12.87/ mcf**

**Residential Price**

**Henry Hub Spot Price**

**Winter**

## U.S. natural gas in storage is projected to remain above historical averages.

**Deviation from 5-year Average (Billion Cubic Feet)**

***U.S. natural gas in storage is projected to remain above historical averages.***

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

| Percent Change from Last Winter (Projected) |  |  |  |
| --- | --- | --- | --- |
|  | Consumption | Average Price | Total Expenditures |
| West | + 2 | + 2 | + 5 |
| South | + 1 | + 9 | + 11 |
| Midwest | + 3 | + 8 | + 11 |
| Northeast | + 6 | + 4 | + 10 |
| U.S. Average | + 3 | + 6 | + 10 |

## Retail heating oil prices are projected to average about 40 cents per gallon higher than last winter.

**October 2007 – March 2008 Average**
**10% Colder = $2.91/ gallon**
**Base Case = $2.88/ gallon**
**10% Warmer = $2.85/ gallon**

## Distillate fuel inventories are expected to remain at average levels.

**Band represents previous 5-year minimum/maximum ranges**

**Forecast**

**Million**
**Barrels**

## U.S. winter heating oil expenditures projected to increase for all regions.

| Percent Change from Last Winter (Projected) |  |  |  |
| --- | --- | --- | --- |
|  | Consumption | Average Price | Total Expenditures |
| West | + 4 | + 13 | + 18 |
| South | + 6 | + 19 | + 26 |
| Midwest | + 4 | + 18 | + 23 |
| Northeast | + 5 | + 16 | + 22 |
| U.S. Average | + 5 | + 16 | + 22 |

## Residential propane prices are expected to average about 23 cents per gallon higher than last winter.

**October 2007 – March 2008 Average**
**10% Colder = $2.34/ gallon**
**Base Case = $2.28/ gallon**
**10% Warmer = $2.20/ gallon**

## Propane inventories are low.

**History / Base Case**

**10% Colder**

**10% Warmer**

- Colored green bands represent normal range published in Energy Information Administration, *Weekly Petroleum Status Report*.

## Propane expenditures are projected to increase in all regions.

| Percent Change from Last Winter (Projected) |  |  |  |
| --- | --- | --- | --- |
|  | Consumption | Average Price | Total Expenditures |
| West | + 2 | + 8 | + 10 |
| South | + 2 | + 13 | + 16 |
| Midwest | + 4 | + 15 | + 19 |
| Northeast | + 5 | + 15 | + 21 |
| U.S. Average | + 3 | + 13 | + 16 |

## Winter electricity expenditure increases are expected to be smaller than other fuels.

| Percent Change from Last Winter (Projected) |  |  |  |
| --- | --- | --- | --- |
|  | Consumption | Average Price | Total Expenditures |
| West | + 2 | + 4 | + 5 |
| South | + 1 | + 2 | + 3 |
| Midwest | + 2 | + 2 | + 4 |
| Northeast | + 4 | + 3 | + 7 |
| U.S. Average | + 2 | + 2 | + 4 |

## Summary

**On average, U.S. households will pay about $88, or 10 percent, more for heating this winter.**
**  **
**Higher expenditures are driven by higher fuel prices and weather-related increases in consumption.**
**Under the baseline forecast, natural gas expenditures could be about $78, or 10 percent, higher for the average U.S. household this winter.**
**Heating oil expenditures are projected to be about $319, or 22 percent, higher for the average U.S. household this winter.**
**Electricity expenditures are forecasted to be $32, or 4 percent, higher for the average U.S. household this winter. **
**A colder winter would raise estimated expenditures somewhat from those of the base case.****  **

## 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 2007*****, February 2007**
***   ******International Energy Outlook 2007*****, May 2007**
**   ****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**
**    “****Impacts of Increased Access to Oil and Natural Gas Resources in the Lower 48                   ****	****Federal Outer Continental Shelf,” *****Annual Energy Outlook 2007***
***    ***
**    **

**www.eia.doe.gov**