MPSC's Winter Energy Appraisal finds mixed outlook in demand for energy products as pandemic impacts wane

FOR IMMEDIATE RELEASE  Nov. 3, 2021

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Demand for energy in most sectors is expected to increase in Michigan in 2021, according to the MPSC's 2021-2022 Winter Energy Appraisal released today. This comes even as prices for natural gas, propane, gasoline, and diesel fuel are higher than this time last year.

Despite the lingering impacts of COVID-19, this Winter's Energy Appraisal returns to providing short term outlooks for commonly used energy products in Michigan - as the economy recovers and consumption tendencies revert to near-normal.

Here are key findings in this year's report: 

  • Natural gas consumption is expected to decline by 4%, in large part because of lower demand from the electric power generation sector. Residential demand, however, is expected to increase by 1%. 
  • Propane usage is expected to increase 9.9% even as prices at the beginning of October averaged $2.39 per gallon, an 80-cent increase from 2020.  
  • Electricity demand is expected to rise about 3% compared to 2020, with industrial and commercial demand growing by 7.1% and 3.1%, respectively. Residential electric demand is expected to grow about 0.2%. Residential electricity rates edged up as customers of investor-owned utilities saw a median rate increase of 2.1% between October 2020 and October 2021.
  • Demand for motor gasoline is expected to increase by 7.9% to 4.2 billion gallons in 2021. Midwest gasoline prices are expected to average $2.86 per gallon for 2021, and $2.72 in 2022, up from $2.04 in 2020.  

Here's the outlook by fuel category:  

NATURAL GAS

  • Key takeaway: Assuming normal winter weather, total natural gas use is expected to decrease 4% to 879.2 billion cubic feet. The decline is driven mainly by the expected 20.2% decline in from the power generation sector. Unless the winter is colder than normal, residential natural gas use, however, is expected to rise about 1% for the 77% of Michigan households that use the fuel for home heating.
  • Supply: U.S. inventories are down 3.6% compared to the five-year average.
  • Cost: The fuel cost portion of natural gas bills is expected to be $3.76/Mcf compared to $2.53 last year.  

PROPANE

  • Key takeaway: Supplies are tighter, and prices are up. 
  • Demand: More than 8% of Michigan households use propane for heating fuel, and with more people working remotely, residential demand could rise. Propane use is expected to rise 9.9%, primarily because of lower demand in 2020 owing to warmer than normal temperatures during last winter's home heating season. Propane in Michigan is commonly used for drying harvested corn crops, but Michigan and other Midwest states are showing progress ahead of the five-year average, indicating potentially lower use of propane for grain drying this fall. 
  • Supply: U.S. inventories are 23% below last year's levels. Midwest inventories were 3.5% below the five-year average.  
  • Prices: Prices rose steadily during winter 2020-21, and the average price of propane between October and March was $1.78 per gallon in Michigan, about 10 cents per gallon higher than the survey period in 2019-20. The Energy Information Administration reports wholesale propane prices in Michigan started this heating season at $1.56 per gallon, 97 cents higher than the prior year, as supplies tighten. For the week of October 25, 2021, the average residential propane price in Michigan was around $2.46 per gallon. 

ELECTRICITY 

  • Key takeaway:  Electric demand is rebounding from pandemic lows.  
  • Demand: Absent abnormal weather, Michigan's total electric sales for 2021 are projected to increase 3.1% to 99.09 thousand GWh compared to 96.15 thousand GWh in 2020, with increases in sales across all sectors.  
  • Supply: No supply shortages or transmission constraints are anticipated.  
  • Prices: Year-over-year changes can vary significantly by utility. DTE Electric Co.'s prices were 1.1% higher in 2021 than the year before, while Consumers Energy's prices were 18% higher. Due, in part, to lower population densities and constraints imposed on the local grid by surrounding electrical generation and transmission systems, portions of the central and western Upper Peninsula continue to pay the highest rates in the state. 

 MOTOR GASOLINE 

  • Key takeaway: Gasoline demand is expected to increase after a dramatic 14.9% decline amid the pandemic in 2020.  
  • Demand: Demand is expected to increase 7.9% to 4.2 billion in Michigan in 2021. 
  • Supply: Average monthly Midwest inventories are expected to decline 41.8% in 2020 as growth in demand outpaces production. 
  • Prices: Prices as of Nov. 1, 2021, averaged $3.26 statewide, up from $2.04 the year before. The EIA expects Midwest retail regular grade gasoline prices to average $2.86 a gallon for 2021 and $2.72 a gallon in 2022.  

DISTILLATE FUELS  

  • Key takeaway: Distillate demand did not decline as dramatically as motor gasoline during 2020's COVID restrictions because of its uses in transporting consumer goods.
  • Demand: Sales in Michigan are projected to increase by 6.1% for 2021, to 1.24 billion gallons, as the economy rebounds from COVID-19 restrictions.  
  • Supply: Midwest distillate stocks as of Oct. 22 were at 30 million barrels, 2 million higher than the year before. National inventories were at 125 million barrels, 31 million barrels lower year over year.  
  • Prices: Nationally, on-highway diesel fuel is expected to average $3.24 per gallon, up 69 cents from the year before; in Michigan, AAA Michigan reports the average price of diesel fuel on Nov. 1 was $3.53 per gallon, up $1.17 from the year before. The average cost of heating oil was $3.19 as of Oct. 25, $1.23 per gallon higher than the year before. 

Read the full Michigan Winter Energy Appraisal

For help with heating bills or energy self-sufficiency, go to the MPSC's webpage on utility assistance. Information also is available on the Home Heating Credit and for help in home weatherization to cut energy costs. 

For information about the MPSC, visit www.Michigan.gov/MPSC, sign up for its monthly newsletter or other listservs, or follow the Commission on Twitter or LinkedIn.

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