AVERAGE ENERGY PRICES

Summary

Average energy prices declined 38 percent in constant dollars from their peak in the early 1980s to 1993. Natural gas prices were less than half their 1982 level in 1993. Gasoline prices dropped almost 50 percent from 1981 to 1993. Electricity prices experienced a more modest decline: 17 percent from the peak in 1984 to 1993. Market factors and the deregulation of the natural gas industry were the drivers for these declines. Washington energy prices historically were about 5 to 10 percent lower than national prices.

	Natural Gas Prices	Electric Prices	Gasoline Prices	Distillate Oil Prices		Average Energy Prices (1993$/MBtu)	Average Energy Prices (1993$/MBtu)
Year	1993 cents/therm	1993 cents/kWh	1993$/gallon	1993$/gallon		Washington	United States
1970	21.9	2.36	1.30	0.58		5.54	5.51
1971	22.2	2.36	1.25	0.57		5.48	5.63
1972	22.6	2.36	1.18	0.57		5.30	5.65
1973	22.5	2.35	1.22	0.62		5.42	5.91
1974	26.5	2.21	1.51	0.90		6.56	7.58
1975	36.8	2.38	1.50	0.91		7.16	8.17
1976	43.3	2.26	1.48	0.94		7.33	8.26
1977	47.8	2.31	1.49	0.98		7.54	8.65
1978	49.6	2.17	1.44	0.95		7.40	8.61
1979	53.7	2.19	1.77	1.25		8.46	9.73
1980	69.7	2.43	2.21	1.64		10.38	11.64
1981	71.5	2.87	2.25	1.77		11.30	12.49
1982	83.4	3.77	2.03	1.75		11.82	12.52
1983	76.8	4.03	1.68	1.62		11.21	11.94
1984	73.0	4.24	1.64	1.53		10.85	11.32
1985	66.9	4.16	1.59	1.47		10.33	11.05
1986	55.4	4.05	1.21	1.08		8.32	9.40
1987	44.4	3.99	1.17	1.09		8.09	9.03
1988	44.7	4.02	1.13	1.06		7.81	8.61
1989	42.6	3.99	1.17	1.13		8.00	8.66
1990	36.5	3.67	1.31	1.23		8.13	8.94
1991	35.0	3.50	1.21	1.15		7.78	8.54
1992	36.0	3.46	1.22	1.10		7.18	8.23
1993	37.5	3.59	1.18	1.13		7.38	8.17
Sources: Consumption -- Energy Information Administration; Price deflator -- OFM, Forcasting Division, Washington Economic and Revenue Forecast

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Why This Indicator?

Average energy prices show how much it costs to purchase a unit of energy. The trends show historical changes in energy prices. Average energy prices provide a basis for comparison of prices consumers are paying within the state and relative to national prices.

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What Are The Trends?

Average energy prices in constant dollars have declined significantly since the early 1980s. However, 1993 prices were higher than early 1970s prices for the major fuels except gasoline. Key trends include:

• Natural gas prices were the most volatile, increasing by almost a factor of four from 1970 to 1982, then declining by more than a factor of two.

• Electricity prices experienced a steep increase from 1980 to 1984, followed by a modest decline through 1992.

• Gasoline prices increased in the early 1970s during the energy crisis and from 1979 to 1981 during the second oil crisis. They declined until 1990 when the Gulf War took place, resulting in a brief upward tick in gasoline prices.

• Distillate oil, which consists primarily of diesel and heating oil, followed similar trends as gasoline. During the energy crisis in the early 1970s, distillate oil prices increased more rapidly than gasoline.

It is important to recognize the prices shown are averages across all customers. Typically, prices to large customers (like industries) are lower than costs for small customers (like residential households). Thus small customers are likely to find they are paying higher prices than the averages in the charts and tables, although the changes in their energy prices may be less dramatic.

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What Does It Mean?

A variety of market (supply and demand) and regulatory forces influence energy prices. Economic trends and world events can have a significant impact on the market and on regulatory policy. The deregulation of the natural gas industry in the early 1980s clearly affected natural gas prices. World events such as the energy crisis and Gulf War had a direct impact on oil and gasoline prices. The break-up of the OPEC oil cartel contributed to declining energy prices. Increasing competitive pressures in the electric industry and expected regulatory reforms will influence future electricity prices.

It is a common perception that energy prices in Washington are significantly lower than in other parts of the country. This is true for electricity, but the data show that the average price for all fuels (weighted by consumption) is only about 10 percent less. Other regions of the country with significantly higher electricity prices than Washington rely more on less expensive fossil fuels (see the box entitled "How Do Prices of Natural Gas, Electricity, and Petroleum Compare"). This difference in consumption patterns moderates the impact of higher electricity prices in other parts of the country on overall average energy price.

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About The Data

Average energy prices are calculated by dividing total end-use energy expenditures by total end-use energy consumption. This is done for each individual fuel and for total energy. This results in an average energy price that is weighted by the amount of each fuel consumed. Energy expenditure and consumption data are from the Energy Information Administration (EIA). The EIA data are adjusted to remove expenditures and consumption for non-energy related petroleum products. (See Appendix D for more information.)

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