EIA Short Term Energy Outlook & Early Forecasts

[Jon Freise]

If you are interested in seeing what US government analysts are saying about the flows of oil and gas and how prices might shift, then a good monthly summary is published here:

https://www.eia.gov/outlooks/steo/

We can see the impacts of the Iran war already in that Liquid Natural Gas prices are up, and so that is driving more coal use and higher coal prices.  That is how I expect the world will cope with the Pars gas field being attacked is trying to shift some natural gas use to coal powered electricity short term.

If the war destroys a lot of export capacity (terminals, fields, LNG liquefaction systems) or the Strait remains closed, then we will likely be facing higher natural gas and electricity prices this coming winter.  But stocks are full, so it is not likely to be a Katrina style price spike.

In the US the energy sector is private and tied to the global market.  So US consumers pay world oil prices even if we are a major producers.  Just think of Texas as being another part of OPEC because that is how it behaves.

The biggest changes since the last big oil shock in 2008 is that the US ban on oil exports is gone.  So we will be paying the world price for oil.  And that there are a lot more NG power plants generating electricity and LNG terminals exporting NG.  Those will both increase the demand and thus the cost for US consumers and industry.  However facking produces a lot more NG (especially as a byproduct of producing fracked oil) and so that will help keep prices lower.

Right now there are too many variables to make a forecast, but rising energy prices until the start of a recession is a reasonable assumption.  $200 a barrel oil is very unlikely because a recession would begin before that and bring the price back down.  Rising unemployment is and cutbacks in discretionary spending are very likely.