Rising electricity demand and higher natural gas prices are expected to drive increased electricity production from renewables and coal in the second half of 2024, according to a just-released forecast from the U.S. Energy Information Administration.
In its July Short-Term Energy Outlook, the EIA forecasts natural gas prices will increase about 36% in the second half of the year compared to the first half.
This is expected to reduce electricity generation from natural gas, the primary fuel source for electricity in the United States.
“Increasing electricity demand combined with declining natural gas generation has created a gap between the electricity needed and the electricity produced,” EIA Administrator Joe DeCarolis said.
The EIA also projects solar generation to increase 42% in the second half of 2024 compared to the second half of 2023. Additionally, the EIA projects wind generation to increase 6%, hydroelectric generation to increase 3%, and coal generation to increase 3% over the same period.
“As natural gas prices rise, utilities will look for more economical alternatives. With so much renewable energy capacity coming online, [in] “We have seen over the past few years that renewables, particularly solar power, will fill a large portion of the gaps in the power mix. We expect utilities to turn to coal as a cheaper fuel source for the remainder of the year,” De Carolis added.
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The government agency noted that the decline in gasoline prices was due to rising gasoline inventories, weaker demand and crude oil prices below recent highs.
The average U.S. price of gasoline has fallen $0.19 per gallon since hitting a 2024 high on April 22. As of July 1, it was $3.48 per gallon, $0.05 lower than the same time last year, according to the EIA.
The energy agency expects Brent crude prices, the international oil market benchmark, to average $89 a barrel in the second half of 2024 and $91 in the first quarter of 2025, up from an average of $84 in the first half of 2024.
A major factor behind the price increases is the EIA’s projection that global crude oil supplies will decrease as global oil production falls and liquid fuel consumption increases.
Paul Hasselbrink, upstream analyst at GlobalData, said: “GlobalData’s forecast is consistent with EIA’s expectation that demand growth between now and 2030 will be driven primarily by China’s demand for petrochemicals and oil as an energy source in India. In contrast, developed countries are expected to see demand decline after the decade.”
The government’s energy agency in May revised its forecast for global oil demand in 2024, now expecting slower demand growth. Additionally, the EIA now expects global oil production to expand at a faster pace than previously expected, resulting in a more balanced market.
Hasselbrink believes that lower oil prices could have a significant impact on countries like Brazil, Mexico and Argentina, which have higher production costs than OPEC+ members. These countries are highly dependent on national oil companies for revenue and will have to make tough decisions about managing potential losses and prioritizing oil fields.
Similarly, the United States and Canada will face difficult choices, he said, including whether they should increase imports from the Middle East and OPEC+ countries, which could pose risks to their energy security, or find ways to support their own oil industries to stay competitive.
