Last year was another year of energy shock, but this time it was producers who were on the receiving end.
Continuing conservation and the worldwide recession combined to hold energy consumption down and resulted in an oil glut, the return--at a handful of service stations--of gasoline for under $1 a gallon, unemployment in the coal fields, "fire" sales on oil and gas field equipment and a good reason to cancel unbuilt electric generating plants.
While all that was going on, however, natural gas prices continued to climb--with eventual increases as high as 25 to 30 percent predicted in some areas. The dominating energy issue in 1982 promises to occupy center stage again in 1983, as the Reagan administration and Congress try to come to grips with modifying the Natural Gas Policy Act.
Energy demand is expected to stay essentially flat during 1983, as well. The failure of the last meeting of the Organization of Petroleum Exporting Countries in December to produce unity should help hold down oil prices. Some even predict an oil price war. Gasoline prices, which dropped approximately 10 cents a gallon in 1982, are expected to continue that decline.
Oil Outlook: Oil demand may stabilize this year after falling by about 13 percent since 1979, according to several predictions. "In general, worldwide demand won't be very different from 1982," according to John Lichtblau, president of the Petroleum Industry Research Council.
Demand for OPEC oil is expected to increase, in part because the drawing down of inventories, which reduced the need in the United States and elsewhere for imports, is over. As a result, imports will have to increase slightly. Even so, Lichtblau predicts that demand for OPEC oil should be 19.5 to 20 million barrels a day. Though that is slightly higher than demand in 1982, it stands in stark contrast to the mid-1970s, when demand was always above 27 million barrels a day.
Although the end of the recession would be a boon to most energy producers, demand will probably never return to its previous levels. To the extent that reduced demand reflects more energy efficient cars, appliances and industrial equipment as well as increased use of insulation, it may be permanent.
Clifford C. Garvin, chairman of Exxon, has estimated that two thirds of the reduction in oil consumption in the past two years reflects such conservation measures and is probably irreversible.
But an economic turnaround would increase demand, nevertheless. "Although economic growth in the year ahead is expected to be modest, and even less than that in some countries, it will help to turn around the steady decline in the world petroleum demand of the past three years," according to Tor Meloe, Texaco's chief economist. "That would be a welcome and significant development, even if the improvement in demand in 1983 may be relatively small," he said.
Although OPEC continues to defy predictions that it will fall apart, it is suffering from both reduced demand and internal feuding.
At the OPEC talks in Vienna in December, the debate between Saudi Arabia and Iran dominated the meeting and prevented the cartel from coming up with a formula for allocating the agreed-upon reduction in production.
Coal: Unemployment in the coal industry is near 25 percent, twice the national average. The depression in the steel industry, here and abroad, carried over to the coal industry in 1982.
Coal production began to drop in the last half of 1982 and is expected to continue at low levels this year. "The coal industry was slow feeling the effects of the recession, and it will be slow coming out if it," said Carl E. Bagge, president of the National Coal Association.
Hard times for coal has produced a shakeout in the coal industry, with small companies falling by the wayside. None of the major companies are endangered, however.
The National Coal Association predicts that coal production will rise 17 million tons, or 2.1 percent, to 837 million tons in 1983. The biggest drop in demand has been for metallurgical coal, reflecting the fortunes of the steel industry, which operated at an average of 48 percent of capacity in 1982.
Its use fell from 61 million tons in 1981 to an estimated 41 million tons in 1982. Use of metallurgical coal is only expected to climb about 5 million tons in 1983.
Coal should fare better in the utilities market, the largest user of coal. There, consumption is expected to increase by about 4.2 percent in 1983. That figure is based on expectations that electricity sales will increase 3 percent.
Electricity: In 1982, electricity sales fell by about 2 percent, in large part because the lights and machinery were off in many steel mills, auto factories and other businesses across the country. A rotten economy and warm weather combined to produce a decline in an industry that once grew at an average annual rate of 9 percent.
Natural Gas: The Reagan administration is expected to introduce a bill dealing with decontrol of natural gas prices early this year. Secretary of Energy Donald Hodel has indicated that the administration approach will combine decontrol with some attempt to provide relief from the problems created by "take or pay" contracts. Those contracts, which obligate pipeline companies to take gas that they have contracted for or pay for it--even when cheaper gas is available elsewhere--have been responsible for recent gas price hikes and have angered consumers.
The American Gas Association says that preliminary figures indicate that natural gas production in 1982 was 18.3 trillion cubic feet (tcf), down from 19.4 tcf in 1981. Consumption in 1982 is estimated to be 19.3 tcf compared with 20.3 tcf in 1981.
The decline in consumption means that higher prices have occurred at the same time a surplus was growing, a fact that has made the price increases even more of a political issue than they would have been.
AGA predicts that price increases will be more moderate in 1983.