Robert J. Beck
Associate Managing Editor-Economics
Economic growth and competitive energy prices will stimulate demand for petroleum and natural gas this year in the U.S. While below last year's rate, economic growth in 1996 will remain solid.
The demand growth rate for the U.S., like those of other industrialized countries, won't match rates in the developing world (see story, p. 73).
Total U.S. energy consumption won't grow as rapidly as the economy because of continuing improvement in energy use efficiency. Consumption of fossil fuel energy will be boosted by low energy output from major renewable fuels, nuclear power, and hydroelectric power.
U.S. petroleum product demand is projected to move up 1.3% in 1996 to average 17.95 million b/d. And natural gas consumption will climb by 2.5% to 21.85 tcf.
Despite the expected modest improvement in oil prices, U.S. crude oil output is projected to continue to slide in 1996. Oil & Gas Journal is projecting a drop of 2% this year. Except for a modest increase in 1991, the year of the Persian Gulf war, U.S. production has fallen at an average rate of 240,000 b/d/year since 1985.
U.S. drilling activity lingers at close to record low rates, with more active rigs now targeting gas than oil.
Falling U.S. oil production and rising demand will result in increased petroleum imports again in 1996. Imports are expected to represent a record high 52.6% of demand this year.
U.S. refining capacity is straining as product demand moves up and expansion of distillation capacity remains inhibited by environmental regulations and costs. That makes U.S. product supply vulnerable to potential accidents or unforeseen shutdowns.
The U.S. economy
U.S. economic growth slowed in 1995 as real gross domestic product (GDP) moved up an estimated 3.4%, compared with 4.1% for 1994. A further slowing to 2.6% is expected in 1996, the fifth consecutive year of economic expansion.
The preceding recession began in the second half of 1990 and lasted through first half 1992. GDP fell 0.7% in 1991, ending a string of 8 consecutive years of growth.
Demand levels for energy and petroleum products declined in 1990 and 1991 but have risen steadily in the current period of expansion.
The expected slowdown in economic growth this year will result from declines in consumer spending and business investment along with reduced government spending.
Major economic indicators will create a mixed picture in 1996. Industrial production, a key component of both economic activity and energy demand, is projected to move up 2.9%, following gains of 3.7% in 1995 and 5.4% in 1994.
New car sales are projected to be up marginally at 8.9 million units in 1996 vs. 8.8 million last year and 9.3 million in 1994.
Housing starts are forecast to remain at 1.3 million units in 1996.
Additional inflation is expected in 1996, with the consumer price index moving up 3.2% after rising 3.1% in 1995. And the GDP implicit price deflator is expected to move up 2.4%, compared with a 1.8% rise in 1995. The latter index is a measure of inflation for all goods and services produced in the U.S.
The unemployment rate is projected to increase to 5.9% in 1996 from an estimated 5.6% last year.
Total energy consumption
The increase in economic activity this year will boost consumption of all energy as well as that of petroleum products and natural gas.
Increased manufacturing activity and a higher level of electricity consumption will be major factors.
Energy efficiency, measured in terms of energy consumption per constant dollar of GDP, has improved steadily since 1970. Relative stability in energy prices has moderated the incentive to reduce energy use overall. And, with the easiest and cheapest conservation methods already in effect, further efficiency gains are increasingly difficult and expensive. As a result, the pace of efficiency improvement has declined.
In 1995 the U.S. economy consumed an estimated 15,700 BTU of energy for every dollar of GDP. This is down 33% from the 23,400 BTU/$ of GNP in 1970. Over that period GDP increased 92%, while energy consumption increased only 29%. In 1996 energy consumption per dollar of GDP is expected to fall again to 15,600 BTU.
Improvements in energy efficiency and conservation are expected to continue. The rate of improvement in energy efficiency will depend on both the cost savings that can be realized and the environmentally inspired mandates for energy use reductions or for changes in the type of energy used.
All of the primary energy sources except hydroelectric power are expected to contribute to the increase in energy consumption in 1996. Growth rates for individual primary fuels will vary depending on their relative cost and any output constraints.
Oil, gas energy
Oil energy consumption is projected to increase 1.3% in 1996 to 35.18 quads after posting no change in 1995. Mild weather in the winter of 1994-95 and competition from natural gas slowed growth in oil consumption last year.
Oil energy consumption increased in each of the three preceding years after declining in 1989-91.
Even though consumption will be up, petroleum's share of the energy market will fall in 1996 to 39.8% from 40% in 1995 and 40.6% in 1994.
Over the past 15 years oil's share of the market has gyrated along with oil prices. It fell from 48.7% in 1977 to 41.8% in 1985, primarily due to higher oil prices. The price slump then stimulated oil consumption, and oil's market share moved up to 43.4% in 1986.
In more recent years, competition from other fuels and environmental concerns, which stimulated efforts to improve petroleum energy consumption efficiency and conservation, have resulted in a continued slide in market share.
Natural gas energy use will increase by 2.5% this year to 22.44 quads. This follows increases of 2.8% in 1995 and 2.4% in 1994.
This year's consumption of energy from natural gas will be the highest since 1973, mainly due to increased demand in the industrial and electric utility sectors.
Deregulation has helped improve efficiency and competitiveness of the natural gas industry. In addition, the federal government in recent years has been encouraging use of gas for environmental reasons rather than discouraging it, as it did in the 1980s.
The natural gas share of the energy market is expected to increase to 25.4% in 1996 from 25.2% last year and 24.9% in 1994.
Combined energy from petroleum and natural gas will continue to dominate the energy market, accounting for 65.2% of the market in 1996, same as in 1995 but down from 65.5% in 1994. Market share has dropped only marginally from 65.9% in 1985. At their market share peak these two fuels contributed 77.7% of U.S. energy in 1972.
Electricity gains
Increased demand for electric power, which lies at the core of future energy consumption gains, helps all forms of primary energy since they all contribute to power generation.
Energy from hydroelectric power increased by 9% in 1995 due to an increase in rain and snowfall. Hydroelectric consumption will remain at 3.48 quads this year.
There is room for greater utilization of existing hydroelectric capacity, but capacity growth will be limited.
The hydroelectric share of the energy market will slide to 3.9% in 1996 from 4% last year.
Even though nuclear power capacity has peaked, in recent years output has grown due to efficiency gains in existing capacity. Consumption of nuclear power, up 5.5% in 1995, is projected to move up 1.8% this year to 7.35 quads. The nuclear power share of the energy market will remain at 8.3% in 1996.
Safety and environmental concerns have curtailed the expansion of nuclear power generation. Last year the Tennessee Valley Authority (TVA) announced that it was stopping construction on the last three nuclear reactors being built for use in the U.S.
Further nuclear output increases thus will have to come from gains in capacity utilization, which will be partly offset by shutdown of old facilities.
The number of operable nuclear power units peaked at 112 in the summer of 1990 and is now down to 109. Nuclear power capacity peaked in August 1990 at 100.49 million kw. Capacity slipped to 97.88 million kw for the first quarter of 1993 but moved back up to 99.15 million kw in 1995.
The capacity utilization rate for nuclear facilities jumped from 62.2% in 1989 to 73.8% in 1994 and an average of 78% for the first 8 months of 1995.
Coal use
Coal energy consumption, mainly for power generation, hardly increased in 1995 because of gains in nuclear and hydro power output and competition from natural gas. Coal consumption is expected to move up this year as the growth in power output from nuclear and hydro facilities slows.
Coal energy consumption is projected to move up 2% to 19.95 quads. Coal's share of the energy market will increase to 22.6% from 22.5% last year.
Coal consumption will increase as demand for electricity grows. However, environmental concerns and related costs of clean air regulations could slow the increase.
Supply
U.S. crude and condensate production is projected to fall 130,000 b/d in 1996 to an average of 6.4 million b/d. Last year's average of 6.53 million b/d reflected a decline of 132,000 b/d.
The OGJ production projection for 1996 represents a decline of 2.571 million b/d from the recent high of 8.971 million b/d in 1985. That is a drop of 29% in domestic crude oil output in 10 years.
In the early 1980s domestic production benefitted from a drilling boom related to high oil and gas prices, increasing by 419,000 b/d during the 1979-85 period. Subsequently, slumping oil prices, costly environmental regulations, and leasing restrictions in promising new areas have limited drilling.
Nothing in sight will reverse the U.S. oil production decline.
Drilling activity remains depressed by historic standards.
The Baker Hughes Inc. count of active rotary rigs averaged 723 in 1995, down from 775 in 1994 and 757 in 1993, and only slightly higher than the modern record low of 717 posted in 1992. OGJ is forecasting a slight improvement to 750 active rigs in 1996.
With new technology, exploration and drilling activity is more efficient than in the past. But the increased output per new well drilled is more than offset by the low level of drilling activity.
In addition, a larger percentage of the drilling rigs now operating are looking for natural gas.
Output of natural gas liquids (NGL) will increase by 30,000 b/d in 1996 to average 1.79 million b/d. NGL output has been generally rising since 1989, when it averaged only 1.546 million b/d. Increased natural gas production, deeper extraction, and prices favoring gas processing have helped boost output.
In recent years other hydrocarbon liquids have made a growing contribution to total U.S. field production. In 1993 the U.S. Energy Information Administration (EIA) started including fuel ethanol and oxygenate production from methyl tertiary butyl ether (MTBE) plants as a part of total liquids production.
As a result, production of liquids other than crude oil, condensate, and NGL moved up from 92,000 b/d in 1991 to 300,000 b/d in 1995. It is expected to move up to 310,000 b/d this year.
Liquids output
OGJ projects total liquids production of 8.5 million b/d for 1996, down 1% from last year and 20% from the recent high of 10.636 million b/d in 1985.
Production from Alaska's North Slope is declining.
Recent federal approval of exports of Alaskan crude might stimulate exploration and production in the area.
Alaskan production last year averaged an estimated 1.485 million b/d, down 74,000 b/d from the year before. Alaskan output peaked at 2.017 million b/d in 1988. Output in 1996 is expected to average 1.47 million b/d.
Lower 48 production averaged an estimated 5.045 million b/d in 1995, down 58,000 b/d from 1994. In the seven producing states with output over 100,000 b/d, production fell in Texas, Oklahoma, Wyoming, and Kansas; moved up in Louisiana and California; and remained steady in New Mexico.
Production averages were Texas 1.631 million b/d, down 65,000 b/d from 1994; Oklahoma 239,000 b/d, down 10,000 b/d; Wyoming 208,000 b/d, down 10,000 b/d; Kansas 123,000 b/d, down 5,000 b/d; Louisiana 1.155 million b/d, up 25,000 b/d; California 960,000 b/d, up 19,000 b/d; and New Mexico 180,000 b/d.
Lower 48 production is projected to fall by 115,000 b/d to an average of 4.93 million b/d this year. The recent high in Lower 48 flow came in 1984 at 7.157 million b/d.
Imports
Total U.S. imports of crude and product will average a record high 9.45 million b/d this year, up 500,000 b/d from last year.
Total imports fell by 46,000 b/d last year to an average of 8.95 million b/d, largely because of heavy product stock draws.
Product imports accounted for all of that decline, averaging 1.6 million b/d, down 333,000 b/d from 1995's level. It was the lowest average for product imports since 1981. Product imports have been as high as 2.295 million b/d in 1988.
Demand for residual fuel, much of which is imported, has fallen in recent years. Resid imports in 1995 averaged an estimated 193,000 b/d, down 451,000 b/d from 1988, accounting for the majority of last year's decline in product imports. But resid demand is not expected to fall in 1996.
Crude imports moved up 287,000 b/d in 1995 to average a record high 7.35 million b/d. Industry crude imports are projected to rise by 350,000 b/d in 1996 to 7.7 million b/d.
Product imports will increase by 150,000 b/d to an average of 1.75 million b/d. With utilization of refining capacity approaching limits, product demand growth will increasingly have to be satisfied by imports.
Dependency on petroleum imports slipped to 50.5% of U.S. demand in 1995 from 50.7% in 1994, the current record high. The recent low was 31.5% in 1985.
The U.S. last imported crude for the Strategic Petroleum Reserve (SPR) in June 1994. SPR stocks remain at 592 million bbl. With fiscal issues receiving priority attention in Washington, D.C., the government probably won't buy crude for strategic storage this year.
Stocks
Industry stocks were estimated at 1.01 billion bbl for yearend 1995, compared with 1.061 billion bbl at yearend 1994.
Last year's stock draw averaged 140,000 b/d. Stock changes have fluctuated in recent years: up 37,000 b/d in 1991, down 79,000 b/d in 1992, and up 136,000 b/d in 1993 and 4,000 b/d in 1994.
The big withdrawal of 1995 pulled industry stocks close to minimum operating levels, which means there will not be a repeat withdrawal this year. At yearend 1995, total industry stocks represented only 56.3 days of supply at the projected 1996 demand level, compared with 59.9 days of supply at yearend 1994.
Yearend stocks have been as high as 78 days of supply in 1981. Industry in recent years has tended to keep stocks at closer to minimum operating levels than it once did in order to reduce carrying costs. Over the past 5 years total stocks at yearend have represented close to 60 days of supply, compared with 76 days in the 1960s and 67 days in the 1970s and 1980s.
OGJ projects an increase in industry stocks in 1996 to 1.028 billion bbl at yearend. Most of the increase will be in product stocks, which will rise to 700 million bbl from 685 million bbl at yearend 1995. Crude stocks are projected to finish the year at 328 million bbl, up from 325 million bbl at yearend 1995.
Refining
U.S. refineries are being run at close to full capacity, and capacity has grown without grassroots construction.
Last year crude oil runs to stills increased 0.7% to an average 13.965 million b/d. Total input to stills moved up 0.6% to average 14.12 million b/d.
Average refining capacity increased by 250,000 b/d for 1995 to 15.4 million b/d.
The capacity growth outran the increased input to stills, reducing the average capacity utilization rate to 91.7% in 1995 from 92.6% in 1994. That is still close to the maximum sustainable rate.
Crude runs are projected to move up slightly more than 1% in 1996 to average 14.145 million b/d. Total input to stills will rise to 14.3 million b/d.
Refining capacity is expected to increase marginally to 15.45 million b/d, the utilization rate averaging 92.6%.
In 1995, increased crude runs combined with product stock withdrawals to produce the 17% decline in product imports. With capacity utilization near maximum rates, however, further product stock withdrawals, can't be repeated in 1996. Improved processing efficiencies only partly offset the effect of physical limits on how much crude refiners can distill.
The sufficiency of refining capacity relative to U.S. product demand is a growing question. A key determinant of how refiners manage this problem will be refining margins.
Margins and prices
Despite demand growth, refiners' crude costs rose more than product prices did in 1995, so refining margins slipped for most of the year.
For the first 9 months of 1995 the Gulf Coast cash operating margin as calculated by Wright Killen & Co. averaged 36/bbl, down from $1.09/bbl in 1994 and $1.40/bbl in the same period of 1993.
After 4 years of decline, the average U.S. wellhead price of crude rose 11% last year to an estimated $14.66/bbl. The price averaged $20.03/bbl in 1990 then fell to $16.54/bbl in 1991, $16/bbl in 1992, $14.25/bbl in 1993, and $13.19/bbl in 1994.
The average landed cost of imported crude oil imports rose 6% last year to $16.15/bbl.
The average pump price for unleaded gasoline moved up only 3% in 1995 to $1.149/gal. This followed a fractional increase in 1994 to $1.112/gal. The refiners' wholesale price of unleaded motor gasoline increased 4% to an estimated average of 62.5/gal in 1995.
Total gasoline taxes at the pump rose to an average 39.3/gal in 1995 from 37.5/gal in 1994, accounting for much of the increase in the average pump price.
The average wholesale price of No. 2 fuel oil increased 4% in 1995 to 52.6/gal following a 7% drop the year before.
Demand
Consumption will move up in all major product categories this year.
OGJ projects total U.S. product demand, including exports, at 18.9 million b/d, compared with 18.63 million b/d last year. Exports fell 3% last year to 910,000 b/d but are expected to average close to 950,000 b/d in 1996. The decline last year was mainly in product exports.
The expected rise in domestic consumption of petroleum products this year will be the fifth consecutive annual increase.
But the consumption level, 17.95 million b/d, will be well below the record high of 18.847 million b/d in 1978.
After that peak, U.S. demand fell steadily to 15.231 million b/d in 1983. It then rebounded to 17.325 million b/d in 1989 before recession and the Persian Gulf war pulled it down in 1990 and 1991.
The amount of oil energy consumed per unit of GDP has fallen from 10,700 BTU/$ in 1973 to an estimated 6,300 BTU/$ in 1995. The ratio is projected to slip to 6,200 BTU/$ this year.
Motor gasoline
Motor gasoline demand is projected to move up again in 1996 due to an increase in economic activity, growth of the vehicle fleet, an increase in miles driven per vehicle, a slowdown in vehicle fuel efficiency improvements, and increased speed limits in most states.
The demand forecast assumes a slowdown in the rate of improvement in vehicle fuel-use efficiency, which may, in fact, have ceased.
Replacement of old, inefficient vehicles-crucial to efficiency improvements since the mid-1970s-is all but complete. And buyer patterns are shifting toward light trucks and large cars.
Reflecting increased demand as well as higher crude costs and the higher costs of reformulated fuel, average pump prices for motor gasoline will rise in 1996.
OGJ projects 1996 motor gasoline demand at a record 7.885 million b/d, compared with 7.795 million b/d last year. This will be the fifth consecutive year of increased motor gasoline demand and the fourth consecutive record. It follows 3 consecutive years of declining demand.
Prior to the recent string of record demand levels, the peak for motor gasoline consumption was 7.412 million b/d in 1978. Rising gasoline prices then encouraged conservation and vehicle efficiencies, which pulled consumption down steadily to 6.539 million b/d in 1983.
Since then, gasoline prices have declined, the economy has mostly grown, the vehicle fleet has expanded, and miles driven per vehicle have risen steadily. Those factors more than offset gains in vehicle fuel efficiency.
Average miles driven per gallon of motor gasoline moved up for 18 consecutive years, from a low of 13.3 mpg in 1973 to 21.69 mpg in 1991, an increase of 63%. EIA estimates show fuel efficiency by this measure falling to 21.68 mpg in 1992, 21.04 mpg in 1993, and 21.48 mpg in 1994.
The average fuel consumed per car per year fell from 771 gal in 1973 to 496 gal in 1991, a drop of 47%. However the consumption total moved up to 512 gal in 1992, 559 gal in 1993, and 551 gal in 1994. This measure is related to miles driven and is not just an indicator of vehicle efficiency.
Total driving is rebounding. Average miles driven per vehicle was 10,256 in 1973. The average fell to a recent low of 9,141 miles/vehicle in 1980, then climbed steadily to 11,839 miles/vehicle in 1994-a 30% increase.
Meanwhile, the total number of automobile registrations increased from 121.6 million in 1980 to 147.2 million in 1994, an increase of 21%. Truck registrations have moved up from 33.7 million in 1980 to 47.6 million in 1994, an increase of 42%.
U.S. motor gasoline prices last year increased by 2% in OGJ's weekly survey. The pump price for self-service, unleaded gasoline averaged $1.141/gal in 1995 vs. $1.116/gal in 1994.
Adjusted for inflation, the price of motor gasoline is close to an all time low. This is a major reason why gasoline demand continues to rise and surpass the impact of efficiency gains.
Jet fuel
Demand for jet fuel dropped by 1% to 1.515 million b/d last year.
Demand for kerosine jet fuel increased 16,000 b/d to average 1.496 million b/d. In the past, kerosine jet fuel was used primarily by commercial aircraft, and changes in demand reflected economic conditions and shifts in commercial aircraft fuel efficiency.
Now the military also uses kerosine jet fuel, having nearly completed its shift from naphtha jet.
Demand for naphtha jet fuel fell by 28,000 b/d last year to average 19,000 b/d. Demand for naphtha jet fuel in 1988 was more than 10 times that level.
Key operating statistics showed increases in airline activity in 1995. Total revenue passenger seat-miles flown by U.S. scheduled airlines for the first 11 months of 1995 were up 3.3% from the year before. Total passenger enplanements moved up 1.5% over the same period. And total available seat-miles were up 2% for the 11 months. There was improvement in both domestic and international activity.
Domestic revenue passenger-miles were up 3% through November. Domestic passenger enplanements were up 1.4%, and available seat-miles were up 1.9%. International revenue passenger-miles moved up 4.1%, passenger enplanements increased 2.6%, and available seat-miles increased 2.4%.
Air freight revenue-ton-miles flown for the first 10 months of 1995 were up 5.6% from the same period of 1994. Domestic freight operations posted an increase of 4.4%, and international operations increased 7.3%.
Jet fuel consumption rose for 9 consecutive years from 1.007 million b/d in 1981 to 1.522 million b/d in 1990. The increase was due to expansion in the commercial airline business. Demand then fell in 1991 and 1992 as the economy moved into recession and the military cut consumption. But as the economy recovered so did demand for jet fuel.
The projected increase in economic activity will boost jet fuel demand again this year, by 20,000 b/d to 1.535 million b/d. The increase will be in kerosine jet fuel, which will increase 24,000 b/d to 1.52 million b/d. Military demand for naphtha jet fuel will fall to 15,000 b/d.
Distillate fuel
Demand for distillate fuel oil is projected to increase to 3.27 million b/d this year from 3.215 million b/d in 1995. The increase will reflect the improvement in the economy and higher heating-season demand for fuel oil. This will be the fifth consecutive year of higher distillate demand.
Demand for distillate hit its peak in 1978 at 3.432 million b/d then fell to 2.671 million b/d in 1982. Gains since then have been interrupted only by the recession of 1990-91.
Last year, economic growth boosted industrial, highway transport, and railroad demand for distillate. And the cool winter weather sustained residential and commercial demand. That pattern is expected to be repeated this year with cold weather during the heating season and competitive fuel oil prices sustaining residential and commercial demand.
Competitive prices will slow fuel oil conservation and conversions to natural gas. And increased economic activity will raise rail and highway transport of goods. Moderate fuel oil prices will also help to maintain and possibly boost industrial and electric utility demand.
Residual fuel oil
Demand for residual fuel will increase 10,000 b/d in 1996 and average 840,000 b/d. The increase will come from the industrial and utility sectors, where resid will benefit from cold weather and rising prices for natural gas.
Increased demand for electrical power could lead to a modest boost in consumption of heavy fuel oil by utilities with fuel-switching ability.
Commercial and industrial demand for resid should move up slightly along with the improvement in the economy. Transportation demand for resid is also expected to move up this year due to the increase in shipping required to meet the rise in crude oil and petroleum product imports.
For demand to rise as forecast, resid must remain competitive in price with natural gas and coal.
Last year, resid demand fell 19% in an expanding economy, its seventh consecutive annual decline. Utilities have slashed their use of resid in favor of natural gas.
Demand for resid was as high as 3.071 million b/d in 1977. Demand last year was down 73% from the peak.
Other products
Demand for LPG and ethane will rise to 1.91 million b/d this year from 1.89 million b/d in 1995 and 1.88 million b/d in 1994.
Normal winter weather, economic growth, and increased chemical industry activity have boosted LPG demand.
Demand for all of the other petroleum products as a group is projected to increase in 1996 to 2.51 million b/d from 2.475 million b/d last year, a 2% decline.
This miscellaneous category will represent 14% of total U.S. demand in 1996.
Demand for other petroleum products is sensitive to changes in the economy and in particular the chemical and construction industries. Increases are expected in demand for asphalt, petrochemical feedstocks, and lubricants as the economy expands and transportation increases.
Natural gas
Natural gas will face price competition from other fuels early in 1996, but consumption is expected to continue to increase.
Natural gas prices started 1996 much higher than they have been recently because of cold weather in the U.S., leading some utilities to switch to oil.
Prices should subside once cold weather ends, although the effect will be moderated by the need to replenish inventories.
Demand rising
Total U.S. natural gas consumption is forecast to move up to 21.85 tcf in 1996 from 21.325 tcf in 1995. Increases are expected in all major economic sectors, with strong improvements in residential and commercial markets due to cold weather.
Competitive prices and lower growth in hydro and nuclear power output are expected to boost demand from the electric utility sector as well. Industrial demand will move up but more slowly than in the other economic sectors. The growth rate for industrial production will be down from a year ago.
Last year's natural gas consumption average represented a 3% increase from the year before. The economic expansion and low prices boosted consumption.
Residential demand slipped last year due to warmer than normal weather, and commercial demand moved up only marginally. But there were major increases in natural gas demand from the industrial and electric utility sectors.
Residential demand fell an estimated 1.5% last year, and commercial demand moved up only 1%. But industrial demand for natural gas surged 5%, and electric utility demand moved up 6%. Part of the industrial demand gain came from nonutility power generation, which is included in this sector.
Consumption of natural gas fell from 20.241 tcf in 1979 to 16.221 tcf in 1986 due to price increases, competition from other fuels, and regulations that kept gas out of boiler fuel markets.
Deregulation has helped natural gas to compete and demand to grow. Gas demand projected for 1996 will be the highest level since 1973.
Natural gas consumption is expected to continue to increase through the 1990s, especially for power generation.
Imports boost supply
U.S. gas production has risen in recent years and will do so again this year.
However, the rate of increase will be less than that of consumption, making room for increased imports. Marketed natural gas production is projected to rise to 20.05 tcf in 1996 from 19.75 tcf last year, the highest level of U.S. gas production since 1981.
Imports of natural gas last year increased 6% to 2.77 tcf. Imports from Canada increased 7% to 2.75 tcf.
LNG imports from Algeria fell to an estimated 19 bcf from 51 bcf in 1994 and 82 bcf in 1993. Gas imports from Mexico totaled just 1 bcf.
In 1996 total gas imports are expected to increase to 2.92 tcf. Canadian imports will increase to 2.895 tcf. LNG imports are projected at 24 bcf and imports from Mexico at 1 bcf.
The price of natural gas fell in 1994 and 1995 after rising in 1992 and 1993. Prices were relatively steady during 1987-91.
The average U.S. wellhead price of natural gas fell in 1995 to an estimated $1.68/Mcf from $1.83/Mcf in 1994 and $2.03/Mcf in 1993.
Prior to that, average gas prices had been relatively steady for 6 years: $1.67/Mcf in 1987, $1.69/Mcf in 1988 and 1989, $1.71/Mcf in 1990, $1.64/Mcf in 1991, and $1.74/Mcf in 1992. Over that period imports increased rapidly while demand growth was relatively slow.
Increased consumption may help boost natural gas prices this year. However, the rate of increase will probably be modest due to competition from fuel oil and coal.
Crude Output Will FallDistillate Demand Will Increase
Rig Activity Will Increase Slightly
OGJ Forecast of U.S. Supply and Demand
U.S. Production of Crude Oil and Lease Condensate
Supply and Demand for Crude in the U.S.
U.S. Energy Consumption and Efficiency
Crude Imports by Country of Origin
Exports of Refined Products and Crude
Marketed Natural Gas Production
U.S. Refined Products, Natural Gas Liquids, and Crude Stocks
Copyright 1996 Oil & Gas Journal. All Rights Reserved.
