General Interest EIA sees return to vigorous U.S. oil, gas demand

The Energy Information Administration (EIA) predicts U.S. demand for petroleum and natural gas will reach levels in 1996 and 1997 not seen since the 1970s. EIA's latest short term energy outlook assumes that a return to normal weather patterns and continued economic growth will spur robust growth in oil and gas demand. It expects U.S. petroleum demand to be 18.15 million b/d in 1996 and 18.46 million b/d in 1997, comparable to record highs of 1977 through 1979, due in large part to rising

Feb. 19, 1996

3 min read

The Energy Information Administration (EIA) predicts U.S. demand for petroleum and natural gas will reach levels in 1996 and 1997 not seen since the 1970s.

EIA's latest short term energy outlook assumes that a return to normal weather patterns and continued economic growth will spur robust growth in oil and gas demand.

It expects U.S. petroleum demand to be 18.15 million b/d in 1996 and 18.46 million b/d in 1997, comparable to record highs of 1977 through 1979, due in large part to rising demand for transportation fuels.

Declining oil production and rising demand will increase net imports of crude and petroleum products 1.22 million b/d during 1995-97. Net imports will equal 49.5% of petroleum demand in 1997 in the base case but could easily top 50% if abnormally cold weather or stronger-than-expected economic growth occurs.

EIA pointed out that the period of relatively low oil prices and high demand of the late 1970s ended when the Iranian revolution and the 8 year war between Iran and Iraq drove the price of oil from its 1977 average of about $12/bbl to $35 by 1981.

EIA expects the average U.S. oil price to remain steady through 1996 and 1997 at the relatively low level of $16/bbl as rising production by the Organization of Petroleum Exporting Countries and non-OPEC exporters keeps pace with world demand.

Distillate demand, which increased 70,000 b/d in 1995, will climb another 90,000 b/d in 1996 and 60,000 b/d in 1997 as continued growth in transportation demand offsets declines in residential and commercial demand.

Motor gasoline demand will increase an average 2.2%/year in 1996 and 1997, reflecting growth in highway travel of 2.6%/year and continuing weakness in motor fuel efficiency growth.

EIA said continued economic growth and lower winter temperatures in 1996 will boost U.S. natural gas demand 2.2% to 22.1 tcf, its highest level since 1973.

Gas demand will rise 2% to a record 22.5 tcf in 1997, mostly due to growth in the industrial and electricity generation sectors.

"The recent runup in the price of natural gas in November-January period appears to have reflected concern that inventory levels were strained to meet the demand caused by a cold winter," EIA said. "However, unless the rest of the winter is unusually harsh, prices are projected to retreat from the January peak, falling through the second quarter 1996 as demand slows."

The average 1996 gas wellhead price will be near $1.80/Mcf, about 20 above the 1995 average, with much of the increase occurring in the first quarter of the year. In 1997, assuming normal weather, the average price will fall as peak demand growth slows.