How STEO Sees The Energy Market

Today, the United States Energy Information Administration (EIA) issued its Short-Term Energy Outlook (STEO). The STEO makes estimates regarding consumption, supply, trade, and the price of fuel. In addition to this, the STEO provides complete market research for the natural gas, crude oil, and petroleum sectors. Despite the fact that the energy market in the United States is the major focus of the STEO, it also gives slight indications for selected overseas energy markets. The following is a list of the most significant components of such a report:

The S&P Global Macroeconomic Model forecasts a growth rate of 0.5% for the GDP of the United States in 2023. Also, it is anticipated that there will be a 1.9% growth in GDP in 2024. According to the report's findings, an anticipated increase in consumer spending will contribute to GDP growth in 2024. The relatively flat economic growth in 2023 is explained by the combination of two factors: first, the predicted decrease in the total energy consumption in the United States by 0.9%, and second, the increase by 1.0% in 2024.

It is forecasted that the production of liquid fuel throughout the globe will increase to 102.8 mbd in 2023, up from 100 mbd in 2022 and 99.4 mbd in 2023. Since production outside of OPEC is growing fast, the STEO research predicts that the total amount of liquid fuel around the world will continue to grow over the next few years.

It is anticipated that a barrel of crude oil will drop to $83 in 2023, an 18% decrease from the price in 2022, and then decline to $78 in 2024. The research shows that an inventory increase worldwide contributed to this price rise.

According to the findings of this report, lower wholesale refining margins and crude oil prices will contribute to a decrease in the price of gasoline. Due to a 29% decline in U.S. gasoline refining margins in 2023 and a further 14% drop in 2024, the research forecasts that retail gasoline prices will average around $3.30 per gallon (gal) in 2023 and $3.10 per gal. in 2024.

A gallon of diesel is expected to cost $4.2 in 2023, representing a 16% decrease from 2022. In 2024, industry experts anticipate a drop in prices that will bring the average down to around $3.7. Refining margins are expected to go down by 20% in 2023 and 38% in 2024. This expected drop in profits is the main reason prices are expected to go down.

The projection for the Henry Hub natural gas spot price in 2023 is a decrease of 25% from 2022 to an average of a little less than $5.00 per million British thermal units (MMBtu) in 2023. Lower local consumption levels coinciding with constant LNG exports may explain the drop. We expect that the natural gas price will again average just around $5.00/MMBtu in 2024, as dry natural gas production will have surpassed an increase in LNG exports brought about by increased capacity for the export of LNG. The report expects an increase in the amount of natural gas produced in the Permian and Haynesville regions as a result of the completion of infrastructure expansions for pipelines in 2023 and 2024, respectively.

Finally, according to the STEO report, total coal power generation is expected to fall from 20% in 2022 to 18% in 2023 and 17% in 2024. This loss will be partially made up for by the expected rise in utility-scale solar and wind energy from 16% in 2023 to 18% in 2024. Such an increase in the level of renewable energy helps make up for some of this loss.

From the recently released STEO report, an overall prediction of the microeconomic behavior in different countries could be extrapolated accordingly.