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EIA sees increase in energy-related CO2 Agency forecasts decrease in domestic natural gas use, with less electricity generated from gas because of 87% gas price increase Kristen Nelson Petroleum News
A highlight of the U.S. Energy Information Administration’s August Short-Term Energy Outlook is a forecast that the U.S. will see a 7% increase in 2021 in energy-sector carbon dioxide emissions as economic activity increases.
This follows a 11% drop in energy-related CO2 emissions in 2020, EIA said in the Aug. 10 release, with the 7% expected increase this year expected to bring the emissions to 4.9 billion metric tons this year.
Because of a significant increase in the amount of electricity generated by coal this year, EIA expects coal-related CO2 emissions to increase by 17%.
“Despite significant growth in energy-related CO2 emissions as the U.S. economy opens up, we don’t see these emissions returning to pre-pandemic levels, at least in the short term,” said EIA Acting Administrator Steve Nalley.
U.S. gross domestic product, which declined by 3.5% in 2020 from 2019 levels, continues to rise, EIA said, and is expected to grow by 6.6% this year and by 5% in 2022.
Brent forecast stable for this year Brent crude oil spot prices averaged $75 per barrel in July, EIA said, up $2 per barrel from June and up $25 per barrel from the end of 2020. “Brent prices have been rising this year as a result of steady draws on global oil inventories,” the agency said. It expects Brent to remain near current levels through the remainder of the year, averaging $72 per barrel from August through November, but falling to an average of $66 per barrel in 2022, based on continuing growth in OPEC+ production and accelerating growth in U.S. tight oil production and other supplies, which will outpace decelerating global oil consumption growth and contribute to a decline in Brent.
EIA estimates global petroleum and liquid fuels consumption at 98.8 million barrels per day in July, up 6 million bpd from July 2020 but still down 3.4 million bpd from July 2019.
Global consumption is forecast to average 97.6 million bpd this year, up 5.3 million bpd from 2020, and to increase by 3.6 million bpd to average 101.2 million bpd in 2022.
OPEC crude oil production is forecast to average 26.5 million bpd this year, up from 25.6 million bpd in 2020, and to increase from an average of 25 million bpd in April to an average of 27.1 million bpd in the third quarter. “Our expectation of rising OPEC production is primarily based on our assumption that OPEC will raise production through the end of 2021 in line with targets it announced on July 18,” EIA said. It expects OPEC production to average 28.7 million bpd next year.
EIA said its most recent monthly data for U.S. crude production, for May, was 11.2 million bpd. The agency expects relatively flat production through October, then beginning to rise in November and December and through 2022, with 2022 U.S. production forecast to average 11.8 million bpd, up for a 2021 average of 11.1 million bpd.
Natural gas The Henry Hub spot price for natural gas averaged $3.84 per million British thermal units in July, up from a June average of $3.26. Henry Hub is expected to average $3.71 per million Btu in the third quarter and $3.42 for all of 2021, up from a 2020 average of $2.03 per million Btu.
EIA said higher Henry Hub prices this year reflect a growth in liquefied natural gas exports and rising domestic gas consumption for sectors other than electric power. Henry Hub is expected to average $3.08 per million Btu next year, “amid rising U.S. natural gas production,” the agency said.
U.S. natural gas consumption is expected to average 82.5 billion cubic feet per day this year, down 1% from 2020, “in part, because electric power generators switch to coal from natural gas as a result of rising natural gas prices.”
U.S. dry natural gas production is expected to average 92.9 bcf per day during the second half of the year, up from 91.4 bcf in the first half, and then rise to 94.9 bcf per day next year, “driven by natural gas and crude oil prices, which we expect to remain at levels that will support enough drilling to sustain production growth,” EIA said.
Pipeline and LNG natural gas exports increased in July from 17.8 bcf per day in June to 18.2 bcf per day in July. Production of dry natural gas decline slightly form 92.7 bcf per day in June to 92.5 bcf per day in July, prompting an increase in the Henry Hub price.
“The 17.9% increase in the Henry Hub price from June to July is the largest month-on-month percentage change for June to July since 2012, when the price increased 20.3%,” EIA said.
Carbon Dioxide EIA said it estimates that U.S. energy-related CO2 emissions decreased 11% in 2020 because less energy was consumed with reduced economic activity and responses to COVID-19. Energy-related CO2 emissions are forecast to increase this year by 7% from 2020 levels “as economic activity increases and leads to rising energy use.” Energy-related CO2 emissions are expected to rise again in 2022, but only by 1%.
Coal-related CO2 emissions declined by 19% last year and are expected to rise by 17% this year and then decline by 7% in 2022.
On the issue of coal vs. natural gas, EIA said although the price of natural gas has steadily increased since March, approaching $4 per million Btu, its share of fossil-fuel generation has remained above 60%. Even when Henry Hub prices were at their highest this year, in July, natural gas accounted for 61% of fossil-fuel generation vs. coal at 39%.
“This difference is partially because of a longer-term trend of decreasing capacity for coal-fired electricity generation and increasing natural gas-fired capacity. Capacity for coal-fired generation has decreased every year since 2011, and natural gas-fired capacity has increased every year since at least 2009,” EIA said.
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