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| Winter 2011 Energy Appraisal | ||||
Energy supplies in Michigan this winter will be adequate to meet anticipated demand; overall annual demand for natural gas, electricity and propane is projected to increase due to a colder than normal 2010/11 winter season and extreme heat in July 2011. Motor gasoline and distillate fuels, however, are expected to decrease as a result of rising crude oil prices exerting downward pressure on both the economy and the consumption of these fuels. Assuming normal winter weather, Michigan residents using natural gas will see a decrease in average winter heating bills. Customers using heating oil and propane will likely see an increase since their pricing is largely tied to the increased cost of crude oil. The projected average cost of crude oil to refiners for 2011 is $100 per barrel compared to $75.60 per barrel average in 2010, a 32 percent increase. This increase has contributed to a sluggish economic recovery and subsequent decline in oil demand. The Energy Information Administration expects U.S. liquid fuel consumption to decline by 170,000 b/d in 2011, with a slight rebound of 80,000 b/d in 2012. Domestic crude oil production continues its upward trajectory due in part to increased oil-drilling, specifically explorations in lesser used shale formations. These production increases have helped to reduce net imports of liquid fuels from 57 percent of total U.S. consumption in 2008 to just 47 percent in 2011. Gasoline sales in Michigan are projected to decrease by 1.7 percent from 2010 sales levels due primarily to a sustained increase in gasoline prices resulting from the rising cost of crude oil. From January to August of 2011, the average price for regular gasoline was $3.65, an increase of 89 cents from the same period in 2010. Regionally,1 gasoline sales are expected to decrease by 0.9 percent in 2011. In addition to a loss of Libyan crude production and unrest throughout the Middle East region, the change to summer fuel blends, flooding in the Midwest and refinery shutdowns also contributed to high gasoline prices. Michigan’s electricity sales are expected to increase 1.9 percent in 2011 compared to 2010 sales. This growth is due to higher consumption across all sectors with the greatest increase coming from residential customers. This increase is attributed to both a winter 2010/11 season that was 3.1 percent colder than normal and a warmer than normal summer. Total electricity demand across all sectors is expected to return to 2008 levels assuming normal weather conditions. Total natural gas sales in Michigan for 2011 are projected to be 758.5 billion cubic feet (Bcf), a 1.5 percent increase from 2010. While modest increases in demand are projected for all sectors, the majority of the increase is expected from residential and industrial customers. Natural gas storage levels are projected to be sufficient to meet anticipated demand for the coming winter. Natural gas prices are expected to average $9.54 per Mcf this winter, a 1 percent decrease from last year. Following the trend set by gasoline sales in 2011, distillate sales are projected to decrease by 1.5 percent to 1,030.2 million gallons in Michigan. Despite the decrease, sales are projected to remain above levels seen in 2009. Much of the decrease can be attributed to high diesel fuel prices and slow economic growth, which have put downward pressure on sales. In the past three years, propane consumption has experienced an overall decline with 2010 sales 25.6 percent below 2009 levels. Assuming normal weather for the remainder of the year, sales for 2011 are expected to increase by 3.6 percent over last year to 287.5 million gallons. Colder weather in the first half of winter 2011 is a contributing factor to this increase; however levels are still over 20 percent below sales in 2009. Assuming normal weather, it is expected that residential heating bills for natural gas will be slightly higher this winter due to increased consumption counterbalancing the effects of lower prices. Normal weather means increased consumption of heating fuels compared to last winter, which was 20 percent below normal. Customers using propane, however, are likely to see little movement in their heating bills, as a significant drop in prices will offset higher usage. As of October 1, 2012, the average price of residential propane price was $1.97 per gallon, 44 cents below the same time last year. |
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This report was produced by the Michigan Public Service Commission, Lansing, MI on May 22, 2012. E-mail questions or comments to moresea@michigan.gov
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