Stable Energy Prices Are Likely During 1990s, Group Says

U.S. consumers can expect mostly stable energy prices in the 1990s, but parts of the Northeast are likely to face a squeeze on electricity supplies early in the decade, an industry research group said Thursday.

The Gas Research Institute, sponsored by natural gas pipeline and distribution companies, said the big increase in oil prices that many forecasters have projected for the mid-1990s is unlikely to hit before the turn of the century.

A key reason for expecting a longer period of stable prices, the group said, is that oil production in high-cost fields, such as the North Sea, has remained strong. Some high-cost production has been lost, particularly in the United States, but the overall decline has been smaller than expected after the 1986 price crash.

The group’s 20-year forecast also said demand for electricity was likely to grow slowly but that some areas nonetheless would experience severe supply problems.

“Capacity shortfalls are now virtually unavoidable in critical areas such as New England,” the forecast said, because too little generating capacity is being added. It said the electricity crunch could hit New England within a few years.

Even if the nation’s electricity use grows relatively slowly to the year 2000, electric utilities will have to build the rough equivalent of 45 new large-scale power plants beyond what’s now planned, the report said.

Oil prices by 1995 are likely to be about $18 a barrel, in current dollars, rising to about $20 a barrel by the year 2000, the group said. Oil currently is selling for about $18 a barrel, up from about $15 a barrel last year.

Some forecasters expect a more rapid price escalation, although many have scaled back their projections in recent years as major oil producers in the Middle East have continued to be saddled with more production capacity than the market needs.

The Energy Department, for example, has reduced its oil price projections but still foresees an average price of $28 a barrel, in current dollars, by the year 2000.

Daniel Dreyfus, vice president for strategic planning and analysis at the Gas Research Institute, said the price of oil will move erratically in the 1990s but probably will not return to the low levels of late 1988, when it sunk to about $12 a barrel.

“We’ve been through the lowest of oil prices,” he told a news conference.

A faster price escalation is likely after the turn of the century, Dreyfus said, as world oil demand moves more into balance with available supplies. The forecast said the price, in current dollars, would be about $32 a barrel in 2010.

Low oil prices during the 1990s imply generally stable prices for all types of energy, including natural gas, coal and products made from oil, such as gasoline, the forecast said. This is because oil is the most versatile and the dominant energy source.

The report also said U.S. oil imports would reach 13.4 million barrels a day by 2010, nearly double the current rate and meeting about two-thirds of total U.S. oil needs. Imports will rise, it said, as domestic production continues to fall.