The current U.S. and global economic downturn has led to a decrease in global energy demand and a rapid and substantial reduction in crude oil and other energy prices. As a result, projections for both energy demand and prices are considerably lower than last month’s Outlook.
The monthly average price of West Texas Intermediate (WTI) crude oil fell from over $133 per barrel in July to about $77 per barrel in October, indicative of the abrupt decline in world petroleum demand growth. The annual average WTI price is now projected to be $101.45 per barrel in 2008 and $63.50 in 2009.
The average U.S. prices for regular-grade gasoline and diesel fuel, at $2.22 and $2.94 per gallon respectively on November 10, were both more than $1.80 per gallon below their highs in mid-July. With a weak economy continuing through most of 2009, along with lower projected crude oil prices, the annual average retail gasoline and diesel prices in 2009 are projected to be $2.37 and $2.73 per gallon, respectively.
Residential heating oil prices during the current heating season (October though March) are projected to average $2.75 per gallon, a reduction of about 17 percent from the 2007-2008 heating season. Residential propane prices are projected to average $2.22 this winter, a decrease of 10 percent from last winter. Residential natural gas prices are projected to average $13.02 per thousand cubic feet (Mcf), an increase of 2 percent from last winter.
The impact of the economic downturn on demand is also lowering current and expected natural gas prices. The Henry Hub natural gas spot price is projected to average $9.27 per Mcf in 2008. The projected 2009 annual average Henry Hub price is $6.82 per Mcf compared with $8.17 in the previous Outlook.
The recent dramatic deterioration in the outlook for economic growth in the United States and the rest of the world has led to a significant reduction in this Outlook’s assumptions for world economic growth and projections of energy demand and prices. World real gross domestic product (GDP) growth is projected to slow from about 4 percent in 2006 and 2007 to about 2.5 percent this year and 1.8 percent in 2009. Last month’s Outlook assumed world GDP would increase by 3.0 percent in 2008 and by 2.8 percent in 2009. Previous lows for world economic growth were 0.3 percent in 1982, 1.7 percent in 1993, and 1.5 percent in 2001.
The year-over-year changes in U.S. real GDP in last month’s Outlook were 1.8 percent growth in 2008 and 0.8 percent growth in 2009. U.S. real GDP growth in the current Outlook has been lowered to 1.3 percent for 2008 and is projected to decline by 1.4 percent in 2009. The 2009 average unemployment rate has been raised from 6.2 percent to 7.9 percent in this forecast. The U.S. manufacturing production index was lowered by 1.1 percent and 7.0 percent for 2008 and 2009, respectively, with the 2009 growth rate of the index falling from a positive 0.5 percent (growth) to negative 5.5 percent (decline).
To view the full report, see the U.S. Department of Energy Outlook