MPSC Issues Summer Energy Appraisal

Contact:  Judy Palnau, 517-241-3323
Agency:  Michigan Public Service Commission

May 22, 2012 - The Michigan Public Service Commission (MPSC) today issued the "Michigan Energy Appraisal: Summer 2012." The appraisal, published since 1978, reviews the projected prices and availability of energy in Michigan over the summer months.

The demand for energy in Michigan is projected to experience modest decreases for all energy sources in 2012. A mild winter season is primarily responsible for decreases in electricity and natural gas, whereas the high price of crude oil has been the major cause of reduced motor fuel demand. Projected steady growth in the U.S. and Michigan economies will place upward pressure on energy consumption; however, continued volatility in crude oil markets will likely exert downward pressure on both the economy and consumption, counterbalancing any potential increases. Due to above average reserves, no supply issues are anticipated for 2012.

Petroleum - Increased demand in developing economies, tensions in North Africa and the Middle East, market speculation and reduced surplus production capacity have led to a sharp increase in crude oil prices. According to the Energy Information Administration's May 2012 "Short-Term Outlook," the U.S. refiner acquisition cost of crude oil is expected to average $110 per barrel in 2012, while the spot price for West Texas Intermediate (WTI) is expected to average $104 per barrel. Domestic crude oil production increased by an estimated 190 thousand bbl/d (3.4 percent) in 2011. The share of total U.S. consumption met by net imports (including both crude oil and products) has been falling since 2005, and averaged 45 percent in 2011, down from 49 percent in 2010.

Motor Gasoline - In 2012, gasoline sales in Michigan are expected to decrease 2.2 percent following a decline of 1.6 percent in 2011. Although recent oil market volatility has been significant, gasoline demand has been on an overall pattern of decline for the past six years.

During the April‐through‐September summer driving season, regular gasoline retail prices are forecast to average about $3.79 per gallon, peaking in April at a monthly average price of $3.90.

Electricity - Assuming normal summer temperatures, Michigan's total electric sales are projected to decrease by 0.2 percent in 2012. This would mark the second year in a row of declining electricity demand. Although slight growth is projected in the residential and industrial sectors, these increases are expected to be offset by a decline in commercial usage. Given the anticipated demand and reinforced by the availability of estimated reserve margins within the MISO and PJM footprints, there should be an adequate supply of electricity over the summer.

Natural Gas - Total annual natural gas sales in Michigan for 2012 are projected to be 717.4 billion cubic feet (Bcf) across all sectors, a decrease of 4.8 percent over 2011 sales, assuming normal weather for remainder of year. The largest decreases are expected in the residential and commercial sectors where natural gas comprises 80 percent and 40 percent of energy consumption respectively.  An unseasonably mild 2011/12 heating season with temperatures 20 percent above normal is largely responsible for the projected decrease. 

Distillate Fuel Oil - Distillate sales in Michigan for 2012 are projected to decrease by 1.4 percent to 1,023.6 million gallons. This is a similar trend to last summer where sales decreased by 0.67 percent as a result of high diesel fuel prices.  The high price of crude is expected to put downward pressure on demand growth, despite modest and steady growth in industrial activity.

The Michigan Energy Appraisal is prepared every six months.  The Energy Appraisal is available on the Commission's website at: http://www.dleg.state.mi.us/mpsc/reports/energy.

The MPSC is an agency within the Department of Licensing and Regulatory Affairs.

For more information about LARA, please visit www.michigan.gov/lara.  Follow us on Twitter www.twitter.com/michiganLARA, "Like" us on Facebook or find us on YouTube www.youtube.com/michiganLARA.

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