Prices for petroleum and natural gas will remain high due to tight international supplies of crude and hurricane-induced supply losses. The price of West Texas Intermediate (WTI) crude oil is projected to average close to $58 per barrel in 2005 and $64-$65 per barrel in 2006. Continued high crude oil prices had been expected prior to Hurricanes Katrina and Rita.
Under the baseline weather case, Henry Hub natural gas prices are expected to average around $9 per thousand cubic feet (mcf) in 2005 and around $8.70 per mcf in 2006. Complete recovery of energy infrastructure from hurricane damage will take many months. However, considerable recovery should occur by the end of 2005. The restart of two major refineries in western Louisiana and another in Pascagoula, Miss., over the past week is particularly encouraging as is the resumed although limited operation of the Henry Hub.
Retail gasoline prices are expected to average close to $2.35 per gallon in 2005 and about $2.45 in 2006. Residential electricity prices are expected to average 9.3 cents per kilowatthour (kWh) in 2005 and about 9.5 cents per kWh in 2006, with significant regional differences depending on the fuel mix used to generate electricity in each region of the country. Under a colder weather scenario, prices for natural gas and all petroleum products are projected to be somewhat higher.
Energy market projections are subject to considerable uncertainty. Price projections are particularly uncertain, because small shifts in either supply or demand, which are both relatively insensitive to price changes in the current market environment, can necessitate large price movements to restore balance between supply and demand.
The Short-Term Energy Outlook can be found on EIA's Web site.
