- Key Energy Issues to 2025
In preparing forecasts for its Annual Energy Outlook, the Energy Information Administration (EIA) evaluates a wide range of trends and issues that could affect U.S. energy markets over the forecast period to 2025. Among the most important issues identified for the 2005 edition (AEO2005) was uncertainty about oil prices and natural gas supply.
Petroleum
Strong growth in worldwide demand for oil, particularly in China and other developing countries, is generally cited as the driving force behind sharp increases in oil prices over the past three years. Other factors include a tight supply situation that has shown only limited response to higher prices; changing views on the economics of oil production; concerns about economic and political situations in several producing regions; and supply disruptions caused by weather events.AEO2005 projects that world petroleum demand will increase from about 80 million barrels per day in 2003 to more than 120 million barrels per day in 2025.
Oil production† from members of the Organization of the Petroleum Exporting Countries (OPEC) is expected to rise from 31 million barrels per day to 55 million barrels per day in 2025, an 80-percent increase. Non-OPEC oil production is expected to increase from 49 to 65 million barrels per day.
World Oil Prices In Two Cases, 1990-2025
(2003 Dollars per Barrel)
Source: Energy Information Administration. Total U.S. petroleum demand is projected to grow at an average rate of 1.5 percent per year, from 20 million barrels per day in 2003 to 28 million barrels per day in 2025.
In the AEO2005 reference case, the average world oil price increases from $28 per barrel (2003 dollars) in 2003 to $35 per barrel in 2004 and then declines to $25 per barrel in 2010 as growth in consumption slows and producers increase capacity and output in response to higher prices. It then rises slowly to $30 per barrel in 2025 (about $52 per barrel in nominal dollars).
AEO2005 includes several cases with alternative paths for crude oil prices. An example is the October oil futures case, which is based on an extrapolation of oil prices loosely corresponding to the price of certain oil futures. In this scenario, oil prices are assumed to average $44 per barrel in 2005 (2003 dollars) before falling to about $31 per barrel in 2010--about $6 per barrel higher than the reference case projection. Prices are assumed to remain above those in the reference case over the entire projection and to be about $5 per barrel higher than the reference case in 2025, at $35 per barrel.
- †Production figures include crude oil (including lease condensates), natural gas plant liquids, other hydrogen and hydrocarbons for refinery feedstocks, alcohol and other sources, and refinery gains.
Natural Gas
Demand for natural gas is projected to increase 1.5 percent per year on average through 2025 as consumption climbs from 22 trillion cubic feet to almost 31 trillion cubic feet, primarily as a result of higher use for electricity generation and industrial applications.Domestic natural gas production is forecast to grow from 19 trillion cubic feet to almost 22 trillion cubic feet over the same period. From 1986 to 2000, 40 percent of increased demand was met by imports, predominantly from Canada, but most of the additional supply over the forecast period is expected to come from Alaska and imports of liquefied natural gas (LNG). Assuming completion of an Alaskan natural gas pipeline in 2016, Alaska's production is projected to rise from 0.4 trillion cubic feet in 2003 to 2.2 trillion cubic feet in 2025.
Average wellhead prices for natural gas in the United States are projected generally to decrease from $4.98 per thousand cubic feet in 2003 to $3.64 per thousand cubic feet in 2010 (2003 dollars) as the initial availability of new import sources and increased drilling expands available supply. After 2010, wellhead prices increase gradually to $4.79 per thousand cubic feet in 2025 (about $8.20 in nominal dollars).
AEO2005 includes a constrained natural gas supply case to examine the implications of a possible future in which no Alaska natural gas pipeline is built, no new construction is started on additional LNG terminals, and production technology advances more slowly than in the past.
Other Energy
Total electricity consumption, including purchases from electric power producers and on-site generation, is projected to increase at an average rate of 1.8 percent per year. Rapid growth in electricity for computers, office equipment, and a variety of electrical appliances in the end-use sectors is partially offset in the AEO2005 forecast by improved efficiency in these and other, more traditional electrical applications and by slower growth in electricity demand in the industrial sector.
Average delivered electricity prices are projected to decline from 7.4 cents per kilowatthour (2003 dollars) in 2003 to a low of 6.6 cents per kilowatthour in 2011 as a result of an increasingly competitive generation market and declining natural gas prices. After 2011, average real electricity prices increase, reaching 7.3 cents per kilowatthour in 2025 (about 12.5 cents per kilowatthour in nominal dollars).
Nuclear generating capacity is projected to expand from 99 gigawatts in 2003 to 103 gigawatts in 2025 as a result of uprates of existing plants. All existing nuclear plants are projected to continue to operate, but new plants are not expected to be economical and no new nuclear plants are forecast.
Energy use per capita and per dollar of gross domestic product, 1970-2025
(Index 1970 =1)
Source: Energy Information Administration.
The use of renewable technologies for electricity generation is projected to grow slowly because of the relatively low cost of fossil-fired generation and because competitive electricity markets favor less capital-intensive technologies. Total renewable generation is projected to increase by 1.4 percent per year over the forecast period.
U.S. coal production is projected to increase at an average rate of 1.5 percent per year to 1,488 million short tons in 2025. The combination of moderate increases in coal production, improvements in mine productivity, and a continuing shift to low-cost coal from the Powder River Basin in Wyoming leads to a gradual decline in the average minemouth price, to approximately $17.00 per ton (2003 dollars) in 2012. The price is projected to remain nearly constant between 2012 and 2019, and then increase to $18.26 per ton by 2025 ($31.25 in nominal dollars) as rising natural gas prices and the need for baseload generating capacity lead to the construction of many new coal-fired generating plants.
Imports
Total energy consumption is expected to increase more rapidly than domestic energy supply through 2025. As a result, net imports of energy are projected to rise from 27 percent of total U.S. energy consumption in 2003 to 38 percent in 2025.
In 2025, net petroleum imports, including crude oil and refined products, are expected to account for 68 percent of petroleum demand (in barrels per day), up from 56 percent in 2003. Net imports of refined petroleum products account for 14 percent of imports in 2003 and grow to 16 percent in 2025.
Three of the four existing U.S. LNG terminals are expected to expand by 2007, and a new facility is expected to be built in the Bahamas serving Florida via a pipeline. Total net LNG imports to the United States and the Bahamas are projected to increase from 0.4 trillion cubic feet in 2003 to 6.4 trillion cubic feet in 2025.
Energy Intensity
Energy intensity--energy use per 2000 dollar of gross domestic product (GDP)--is projected to decline at an average annual rate of 1.6 percent, with efficiency gains and structural shifts in the economy offsetting growth in demand for energy services.
Although energy price increases are expected to induce energy conservation, AEO2005 does not assume new policy-based conservation measures or any behavioral changes beyond those experienced in the past.
Carbon Dioxide Emissions
Carbon dioxide emissions from energy use are projected to increase from 5,789 million metric tons in 2003 to 8,062 million metric tons in 2025, an average annual increase of 1.5 percent.
However, the carbon dioxide emissions intensity of the U.S. economy is projected to fall from 558 metric tons per million dollars of GDP in 2003 to 397 metric tons per million dollars in 2025--an average decline of 1.5 percent per year.
Annual Energy Outlook 2005 DOE/EIA-0383(2005).
The Annual Energy Outlook 2005 is available on the EIA Web site at http://eia.doe.gov/oiaf/aeo/
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File last modified: February 22, 2005