of liquid fuels — mostly crude oil but also refinery volume gain , hydrocarbon gas liquids , biofuels , and other oils — to develop an estimate of changes in global oil inventories . In general , oil prices tend to increase when oil inventories fall and decrease when inventories grow .
Although we expect prices to fall , we think three key factors ultimately present the possibility for higher prices :
Russia ’ s oil production and upcoming product import ban
Russia produced about 11 % of the world ’ s oil in 2022 , and its ability to supply global petroleum markets is one of the largest sources of uncertainty in our forecast . The upcoming EU ban on seaborne imports of petroleum products from Russia on February 5 could be more disruptive than the EU ban on seaborne imports of crude oil from Russia implemented in December 2022 .
We assume Russia will be able to reroute some of its petroleum exports subject to EU sanctions . But we do not expect all its refined product exports will find new destinations because of limited clean tanker availability , which will cause Russia to reduce their crude oil inputs to refineries and for their crude oil production to continue to decline . However , Russia ’ s ability to reroute its petroleum product exports depends on other countries ’ willingness to buy Russia ’ s petroleum and the flexibility of global petroleum product supply chains .
Other sources of petroleum supply growth U . S . oil production is the largest source of production growth in our forecast , but that growth remains uncertain because of relatively low capital investment from oil producers . Despite relatively low investment , we expect increases in drilling productivity and associated natural gas takeaway capacity from the Permian region will result in record annual U . S . crude oil production in 2023 and 2024 .
OPEC members collectively produced 34 % of total petroleum liquids in 2022 . After the United States , OPEC is the second-largest source of production growth in our forecast . However , any OPEC production cuts would tighten balances and result in higher oil prices than we forecast . Late last year , the United States lifted sanctions on Venezuela , which has been exempt from current OPEC production agreements . We assume Venezuela ’ s crude oil production will increase higher than their recent five-year average .
We expect oil production in Canada , Brazil , and Norway collectively to grow 12 % from 2022 to 2024 . We also expect growth from new sources like Guyana . Oil supply growth from these sources could be lower than we forecast because of delays in project start times .
CHINA ’ S EFFORTS TO REOPEN
China ’ s efforts to reduce the spread of COVID-19 in 2022 led to mobility restrictions , economic slowdown , and a decline in oil consumption . The pace and magnitude of China ’ s efforts to reopen and loosen mobility restrictions present another considerable uncertainty for global oil markets . China ’ s consumption could be less than we forecast at first if rising COVID-19 cases cause significant disruptions to economic activity and travel , particularly in early 2023 .
China ’ s oil consumption could end up being more than expected in 2024 if the end to COVID-related restrictions ultimately results in higher and more sustained economic growth . China accounted for about 15 % of world petroleum consumption in 2022 , so changes in petroleum consumption in China can have large effects on global oil balances and prices . Data source : U . S . Energy Information Administration , Short-Term Energy Outlook , January 2023 Release Date : January 10 , 2023
EIA SEES RISING USE OF RENEWABLES TO GENERATE POWER
Increasing renewables likely to reduce coal and natural gas generation over next two years .
In our latest Short-Term Energy Outlook , we expect that increased U . S . power generation from new renewables capacity — mostly wind and solar — will reduce generation from both coal-fired and natural gas-fired power plants in 2023 and 2024 .
With the new solar and wind projects coming online this year , we forecast these two energy sources will account for 16 % of total generation in 2023 , up from 14 % last year and 8 % in 2018 . In contrast , our forecast share of generation from coal falls from 20 % in 2022 to 18 % in 2023 ; the forecast share from natural gas declines from 39 % to 38 %.
One of the most significant shifts in the mix of U . S . electricity generation over the past few years has been the rapid expansion of renewable energy resources , especially solar and wind . The U . S . electric power sector operated about 74 gigawatts ( GW ) of solar photovoltaic capacity at the end of 2022 , which is about three times the capacity at the end of 2017 . U . S . wind power has grown by more than 60 % since 2017 to about 143 GW of capacity .
Based on planned additions reported to EIA , solar capacity will expand another 63 GW ( 84 %) by the end of 2024 , which is consistent with its declining construction costs and favorable tax credits . As a result of this expected increase in solar capacity , we forecast that the solar generation share will rise from 3 % of U . S . generation last year to 5 % in 2023 and 6 % in 2024 . Scheduled growth in wind power is slightly slower this year than in recent years , at about 12 GW of new planned capacity over the next two years . The forecast wind generation share in 2023 remains relatively similar to last year , averaging 11 %, and then increases to 12 % in 2024 .
Much of the growth in solar capacity is in Texas and California , where natural gas has been the primary source of electricity . A growing share of generation from renewables , combined with our forecast of less overall electricity demand this year , displaces some natural gas generation , which will decline slightly , falling from 39 % in 2022 to 38 % this year and to 37 % in 2024 . We also expect that the coal generation share will decline by two percentage points to 18 % this year , as lower natural gas fuel
12 FEBRUARY 2023 | FUEL OIL NEWS | www . fueloilnews . com