Energy Report: Oil Inflation

EIA estimates that U.S. natural gas consumption averaged 83.1 billion cubic feet per day (Bcf/d) in 2020, down 2.5% from 2019. EIA expects that natural gas consumption will decline by 2.8% in 2021 and by 2.1% in 2022. Most of the decline in natural gas consumption is the result of less natural gas use in the power sector, which EIA forecasts to decline because of rising natural gas prices. These declines are partly offset by rising natural gas use in other sectors.

EIA estimates that 2020 dry natural gas production averaged 90.8 Bcf/d, down 2.5% from 2019. EIA expects U.S. dry natural gas production to average 88.2 Bcf/d in 2021, down by 2.8% from 2020, and then rise to 89.7 Bcf/d in 2022.

EIA forecasts that the total consumption of electricity in the United States will increase by 1.5% in 2021 after falling by 4.0% in 2020. The pandemic significantly affected electricity consumption in the commercial and industrial sectors in 2020. EIA estimates retail sales of electricity to the two sectors fell by 6.0% and 7.9%, respectively. EIA expects commercial electricity use in 2021 to rise by 0.9% and industrial electricity use to rise by 1.2%. Social distancing guidelines have caused people to spend more time at home, resulting in increased residential electricity use. In 2020, retail sales of electricity to the residential sector were 1.3% higher despite a mild winter earlier in the year. EIA expects residential electricity use will rise by 2.4% in 2021 as colder winter weather leads to more heating demand. Total forecast electricity consumption in 2022 will rise by 1.7%.

EIA expects the share of U.S. electric power sector generation from natural gas will decline from 39% in 2020 to 36% in 2021 and 34% in 2022 in response to significantly higher natural gas fuel costs and increased generation from renewable energy sources. Coal’s forecast share of electricity generation will rise from 20% in 2020 to 22% in 2021 and 24% in 2022, which is close to its share in 2019. Electricity generation from renewable energy sources will rise from 20% in 2020 to 21% in 2021 and 23% in 2022. The nuclear share of U.S. generation will decline from 21% in 2020 to 20% in 2021 and 19% in 2022.

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