Lansing, MI - Help is available for Michiganders grappling with higher energy costs amid fallout from the COVID-19 pandemic and Russia’s war on Ukraine, factors that the Michigan Public Service Commission’s Michigan Energy Appraisal Summer Outlook 2022 finds are leading to higher prices amid rising demand across all energy sectors.
Demand for motor vehicle fuels, electricity and natural gas will continue to increase in 2022 even as prices for all three commodities are on the rise, according to the MPSC’s annual summer energy report released June 17, 2022.
Michiganders struggling with these costs have options for help. Those having trouble paying home energy costs may contact their electric or natural gas utilities for information about financial assistance, or contact Michigan 211 by calling 211 or going to www.mi211.org. Michigan 211 is a free, confidential service that connects Michiganders with a broad range of assistance programs and services and other resources, including help with food, housing, transportation and home energy bills.
More energy assistance information is available through the MPSC’s energy assistance consumer tip sheet. Utility customers also can help reduce their costs by using energy efficiently. Check out the MPSC's consumer tip on beating the heat for suggestions on reducing energy use. The U.S. Department of Energy has additional spring and summer tips for saving energy.
National and global uncertainty persist in putting pressure on energy supply and pricing. The MPSC’s annual report finds that Michigan drivers can expect higher prices for gasoline and diesel to continue amid increases in demand for both automotive fuels. Demand for electricity is expected to rise in the industrial sector but decline among commercial and residential customers. Natural gas demand is expected to grow significantly across all sectors.
This year’s report also notes critical issues the MPSC will monitor closely this year.
First, motorists are paying significantly higher fuel costs during this summer driving season. Regular unleaded gasoline averaged $$5.20 per gallon in Michigan as of June 16, and diesel fuel was at $5.89 per gallon. Prices have surged based on lower supplies and geopolitical turmoil stemming from Russia’s invasion of Ukraine and embargoes against Russian oil.
Second, the 2022-23 Midcontinent Independent System Operator (MISO) Planning Resource Auction clearing prices for the North and Central regions, which includes a majority of Michigan as well as portions of eleven other states, was $236.66 per megawatt day (MW-Day), due to insufficient levels of capacity resources. This compares to $5.00/MW-Day in last year’s auction. MISO is the regional power grid operator in 15 states and the Canadian province of Manitoba. MISO cites a decline in generation capacity of 2.3% in summer 2022 compared to the previous year, despite rising demand. This means the region faces an increased probability of outages this summer due to a lack of supply compared to last year and compared to widely accepted industry standards.
Here are the expectations from the MPSC’s Energy Security Section for energy supply and demand in Michigan for summer 2022.
ELECTRICITY
- If weather is in the normal range, total electric sales are expected to increase 0.9% to 11.27 thousand gigawatt hours (GWh), up from 99.4 thousand GWh in 2021. The projected increase comes primarily from the industrial sector, at 4.3% growth. Slight declines are expected for the residential (-0.5%) and commercial (-0.2%) sectors.
- That comes after industrial electric sales increased 4.3% in 2021 after declining 14.2% in 2020 amid the economic fallout from COVID-19.
- Residential electric rates edged up slightly, as customers of investor-owned utilities saw a median rate increase of 6.4% between May 2021 and May 2022.
NATURAL GAS
- Natural gas demand is expected to rise 13.8% in 2022 as demand increases across all sectors: 13.8% in residential, 6.3% in commercial, 10.5% in industrial and 20.7% in electric power generation.
- The Energy Information Administration expects Henry Hub natural gas prices to average $7.69 per thousand cubic feet (Mcf) for 2022 and $4.92/Mcf in 2023; this compares to the $4.06/Mcf seen in 2021. During May 2022, the Henry Hub futures price for June contracts averaged $8.16/Mcf, more than double the average price at the same time in 2021.
- Natural gas storage levels are projected to be about 577 billion cubic feet (Bcf) at the end of 2022, 16% higher than the previous year.
GASOLINE
- Demand for motor gasoline is expected to rise by 0.1% to 4.3 billion gallons in 2022.
- According to AAA, the average price for a gallon of regular unleaded gasoline in Michigan on June 16, 2022, was $5.20, compared to $3.16 a year ago.
- Relatively low gas prices in recent years reflected reduced demand during the pandemic. But with continued geopolitical risks, crude oil prices are likely to remain elevated, keeping costs at the pump high.
- National gasoline inventories are currently near the bottom of the five-year range for this time of year. For the week ending June 10, U.S. total gasoline inventories were at 218 million barrels (24 days of supply), down 25 million barrels from the same date last year. Midwest inventories were at 45 million barrels, about 3.6 million barrels lower than last year.
PETROLEUM
- U.S. crude oil production averaged 11.19 million barrels per day (b/d) in 2021 and is expected to increase to 11.92 million b/d for 2022 and up to 12.97 million b/d in 2023.
- U.S. crude oil stocks are currently 48 million barrels lower than a year ago as demand has outpaced supply additions. As of June 10, 2022, the U.S. had 419 million barrels in inventory, a 10% decline relative to 2021.
- The EIA projects petroleum will average $102.47 per barrel (bbl) for 2022 and $93.24/bbl in 2023 West Texas Intermediate crude oil. The Brent (North Sea) crude oil spot price is forecast to average $107.37/bbl and $97.24/bbl, respectively.
DISTILLATE FUELS
- Demand for distillates — the majority of which is diesel fuel – is projected to climb, reaching 1.27 billion gallons for 2022. Michigan’s industrial production index, an economic indicator used to measure output from the industrial sector, is expected to grow by 5.5% for 2022, increasing demand for the fuel.
- No. 2 heating oil prices ended the 2021/22 heating season $1.81/gallon higher than last year at an average of $4.45/gallon.
- The EIA expects retail prices for on-highway diesel fuel will average $4.69 per gallon for 2022, up $1.41 from 2021. But the EIA projects distillate prices will decline slightly for 2023, with prices estimated to average $4.13 per gallon.
- According to AAA Michigan, the average price of diesel in Michigan was $5.89 per gallon on June 16, 2022, $2.62 per gallon higher than this time last year.
- For the week ending June 10, national inventories of distillate oil were 110 million barrels, about 26 million barrels lower year over year. Midwest inventories for the same week totaled 26 million barrels, 4.1 million barrels lower than a year ago.
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