What to Expect From the 2022 Energy Market
2021 has been another year for the history books. But now, it’s time to start looking ahead into 2022 and what the new year has in store for the energy market. In this article, we’ll dive into predictions for the 2022 energy market, including oil, natural gas, electricity, and renewables.
It is worth nothing that these predictions remain subject to uncertainty due to the ongoing coronavirus pandemic, notably the new Omicron variant, which may affect energy consumption around the world.
In oil markets, we expect the next year to be relatively volatile. While demand is largely back at pre-pandemic levels, government reactions to Omicron (and other forthcoming variants), Iran actions, or discontent within the OPEC coalition have the potential to disrupt supply and demand. However, assuming OPEC continues with its planned increase in production this January, expect oil prices to average $70/barrel throughout 2022.
Natural gas prices soared over the summer and much of the fall. Then, over Thanksgiving, natural gas prices had the biggest one-week decline since 2014. Winter pricing is down $0.85 since the end of November and prices remain low due to an unusually warm December. If such warm weather continues, we could possibly see prices as low as $2/MMBtu in summer 2022.
According to the Energy Information Administration (EIA), the amount of electricity produced by natural gas in the United States will average 35% in 2022, down from 39% in 2020. This will be due to natural gas share declines in 2022 due to an increasing share of renewable generation. Meanwhile, the amount of electricity generated via renewable sources will be 22% in 2022, with nuclear making up 20% and coal 22%.
Renewable energy growth is set to accelerate in 2022, as concern for climate change and support for environmental, sustainability, and governance (ESG) grow and demand for cleaner energy sources accelerates. In 2022, expect 7.1 GW of new wind capacity, 20.9 GW of solar, and 5.0 GW of small-scale solar capacity. In addition, we expect emerging technologies like advanced batteries, long-term storage, and green hydrogen to become more commercial, especially with the formation of the new Department of Energy (DOE) Office of Clean Energy Demonstrations, which is focused on supporting just such new technology.
For a highly detailed prediction of the 2022 energy market and a summary of the 2021 market, view the Energy Information Administration’s December Short-Term Energy Outlook here.
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