Gasoline prices will drop to $2 per gallon by 2021 as natural gas supplies increase
The price of natural gas will drop below $2 a gallon by the end of 2021, a company report found Tuesday.
The report by GasBuddy Analytics and research firm SNL Kagan said that while the market is already seeing price decreases from the shale boom, the impact will be even more pronounced as the industry ramps up production.
The price will drop by less than one-third by 2021, from $2.16 a gallon to $1.65, the analysts found.
In a note to clients, SNL said it had used gas price data from the Energy Information Administration (EIA) to estimate that prices will continue to drop as more natural gas is produced.
The EIA estimates that gas production will increase by an average of 5 percent per year over the next 15 years, to 3.9 million megawatt-hours (MWh) per year by 2023.
SNL also said that natural gas prices have been on a downward trajectory since mid-2017, as the price of gas has declined for every quarter since January.
Gas prices have dropped more than $2/gal since the end to mid-2018, according to SNL.
Gas is expected to continue to fall at an average rate of 4 percent a year until 2023, the company found.
The analysts said that the decrease will be more pronounced if natural gas production ramps up and that the U.S. Energy Information Agency (EISA) forecasts that gas will be in demand by the year 2020.
SNLP Kagan analysts said the decline in natural gas and rising oil prices will help fuel the growth of other energy-intensive sectors, including electricity generation and transportation, and the growth in the U,S.
Natural gas, the leading fuel source for natural gas-fired power plants, is expected be the main driver of the economy’s energy mix by 2027.
The company forecast that energy demand for natural-gas-fired generation will grow by 2.3 percent a, to 8.7 billion MWh, and demand for electricity-generated generation will increase 2.1 percent to 9.1 billion MWe, to an average 3.5 percent ayear.
SNLCK analysts said they also believe that the rise in natural-fuel prices will drive demand for more coal-fired energy sources, as well as the expansion of coal-to-gas conversion facilities and other coal-burning technologies.
They said natural- gas prices will rise about 4 percent annually until 2021, with a gradual increase to 9 percent ayr.
SNLL said that it expects the oil price to decline to $40 a barrel in 2021, and natural gas to $60 a barrel.
SNLA said that gasoline prices will fall to $4.60 a gallon, with diesel prices falling by 3.3 cents a gallon.
SNOLL said that gas prices are expected to fall to about $2 by the start of 2021.
SNLOZ said it expects that gas price declines will continue until 2026, as natural- and nuclear-generated electricity generation increases by about 1 percent per annum.
SNLDK said that oil prices are likely to remain at around $60 for the rest of the decade, but the decline will be uneven, with natural gas becoming a major fuel.
SNPLK said prices for oil and natural- Gas prices are already starting to fall, but it is not clear how far they can go.