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Nov. 17, 2008: Economic Downturn Leads to Reduced Energy Demand and Lower Prices

November 17, 2008
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WASHINGTON - The current United States 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, notes the U.S. Department of Energy’s (DOE’s) Energy Information Administration (EIA). As a result, EIA’s latest Short Term Energy Outlook projections for both energy demand and prices are considerably lower than last month.

The average U.S. prices for regular-grade gasoline and diesel fuel as of mid-November were both more than $1.80 per gallon below their highs in mid-July. With a weak economy expected to continue through much 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 2007-08 heating season. Residential propane prices are projected to average $2.22 this winter, a decrease of 10 percent from last winter. However, for natural gas, household heating expenditures this winter are expected to be slightly higher than last year due to the pass-through of some higher-priced natural gas that was put in storage earlier in the year to meet winter demand. Residential natural gas prices are projected to average $13.02 per thousand cubic feet (Mcf), an increase of 2 percent from last winter.

The recent drop in power generation fuel costs has caused some electric utilities to reconsider the steep price increases announced this past summer. However, fuel costs still remain relatively high, and it is unlikely that electricity rates for most customers will fall significantly in the near term. U.S. residential electricity prices are expected to increase by about 6.5 percent in both 2008 and 2009.

Publication date: 11/17/2008

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