A higher rate of economic growth will lead to a greaterexpansion in natural gas use than previously forecast over the next20 years — to 34.7 Tcf/ year in 2020, up from 31.5 Tcf — and a10% increase in projected prices — from $2.81/Mcf to $3.13,according to the Energy Information Administration’s latest report.

EIA’s Annual Energy Outlook 2001 (AEO2001) released last weekprojects U.S. economic growth at an average rate of 3% a year overthe next 20 years, up from its previous estimate of 2.1% per year.The economic growth will boost overall U.S. energy demand from 96quadrillion Btu in 1999 to 127 quads in 2020, up from the 121energy quads projected by EIA one year ago. The increase in theprojection for natural gas demand by 2020 of slightly over 3 Tcf(loosely equal to 3 quads) is responsible for about half the changein energy projections.

EIA says the 62% increase in gas demand from 21.4 Tcf in 1999 to34.7 Tcf in 2020, will be spurred by a tripling of gas use forpower generation. During the next 20 years 89% of new powergeneration units will be fueled by natural gas. Gas prices areexpected to decline within two years from current highs. “In thelonger term, technology improvements in the exploration andproduction of oil and natural gas are expected to moderate priceincreases even as demand for these fuels grows.”

EIA projects world oil prices will reach $22.41/barrel (in 1999dollars) in 2020, up just slightly from the $22.04 in last year’sforecast.

The federal bean counters see a 1.8% average annual increase inpower demand over the next 20 years, compared to the 1.3% theypredicted last year. Prices will decline from the current 6.7 centsper kWh, but not as much as predicted last year due to the higherprojected gas prices. Instead of 5.8 cents per kWh in 2020, EIA’sAEO2001 sees electric rates holding at 6.0 cents per kWh.

Power to be provided by nuclear generation jumped 34% from theforecast last year “due to lower estimated costs for extending thelife of current nuclear plants and higher projected natural gasprices, although total nuclear generation still declines as someexisting plants retire.”

Coal will still be the primary fuel for power generation, butits share will dwindle from 51% to 44% of the generating total.

Ellen Beswick

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