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U.S. ENERGY INFORMATION ADMINISTRATION Energy Markets Course Dependent On Oil Prices, Economic Growth, U.S. net petroleum imports, which account for 55 percent of total petroleum demand in 2001, could range from a low of 65 percent of petroleum demand to a high of 70 percent of demand by 2025 (Figure 1), depending upon the path of world oil prices, according to the Energy Information Administration (EIA), which today released the complete Annual Energy Outlook 2003 (AEO2003) report, including alternative cases. Depending on the ability of the Organization of Petroleum Exporting Countries (OPEC) to control their oil production, the rate of economic growth of countries worldwide, and the economics of alternative sources of supply such as natural gas to liquids and oil sands, real world oil prices in 2025 could range from $19 to $33 per barrel (real 2001 dollars) (Figure 2), leading to variation in U.S. oil import dependence. The level of total U.S. energy consumption could also vary significantly depending on the rate of economic growth. EIA projects that annual growth in Gross Domestic Product (GDP) between 2001 and 2025 could range from 2.5 to 3.5 percent, with 2025 energy consumption ranging between 129 and 149 quadrillion Btu. Changes in energy consumption are related to changes in economic growth, because energy is one of the primary inputs to the production of goods and services. However, EIA forecasts that the nation will continue to use energy more efficiently between now and 2025. This will help to hold the rate of growth in consumption to about 50 percent of the rate of growth in economic output. The interaction of consumer behavior and technological progress is illustrated in AEO2003. For example, total primary residential energy consumption is projected to grow to 25.4 quadrillion Btu by 2025 (from 20.1 quadrillion Btu in 2001) in the AEO2003 reference case, assuming historical rates of technological progress in residential equipment and appliances. However, if residential consumers uniformly adopted the best available technology, total consumption could be 20 percent lower in 2025. Consumer preference for a shorter payback period and other barriers to the selection of the best available technology, such as limited availability of information and a disconnect between the equipment decisions made by builders and consumers, inhibit the adoption of the best available technology. The same factors are evident in energy consumers’ actions in the transportation sector. In recent years, transportation consumers have indicated a clear preference for larger, heavier vehicles with more powerful motors over efficiency (miles per gallon). This is evidenced by the sharp surge in demand for sport utility vehicles (SUVs), which now account for over one-half of the sales of light duty vehicles. AEO2003 expects this trend to continue over the next decade. As a result, total primary transportation sector energy consumption increases from 27 quadrillion Btu in 2001 to 44 quadrillion Btu by 2025 in the reference case and, while new cars meet existing CAFE standards (new car MPG is projected to increase from 28.1 MPG in 2001 to 30.1 MPG by 2025), the average stock efficiency of light-duty vehicles is projected to increase only modestly, from 19.8 MPG in 2001 to 20.2 MPG by 2025. Sales of alternative fueled vehicles (e.g., hybrids, turbo direct injection, alcohol [E85], fuel cells, natural gas, and electric) are projected to grow over time from 12 percent of new vehicle sales in 2001 to 20 percent by 2025, but over 80 percent of these sales are due to State and Federal mandates (e.g., low and zero emission vehicle programs). With continued growth in natural gas demand and depletion of the conventional natural gas resource in the lower-48 United States, future natural gas supplies are likely to become more dependent on investment in large, new domestic and imported supply projects such as the Alaskan natural gas pipeline, the MacKenzie Delta pipeline in Canada, and new LNG facilities in both the United States and those built to serve U.S. markets (e.g., Baja California, Mexico or the Bahamas). In the reference case, the Alaskan natural gas pipeline is projected to come online in 2021 (excluding consideration of any potential loan guarantees by the Federal government that accelerates construction), the MacKenzie Delta pipeline in 2016, and total LNG imports are projected to grow to 1.6 trillion cubic feet (Tcf) by 2020 and 2.3 Tcf by 2025 with facilities online in the Gulf region, serving Florida (via the Bahamas), and California (via Baja California, Mexico). The timing and demand for these supplies varies depending on the rate of technological improvement. If drilling costs, success rates and finding rates improve at a slower rate than in the reference case, the Alaskan natural gas pipeline and MacKenzie Delta pipeline are projected to come online earlier in 2019 and 2015, respectively. In this case, total net LNG imports grow to 2.3 Tcf by 2020 and 3.2 Tcf by 2025. Conversely, if more rapid technology improvement holds down natural gas prices (Figure 3) longer it will delay construction of these facilities. In a scenario with the rapid technology improvement, the Alaskan natural gas pipeline is not economically viable until 2024 and the MacKenzie Delta pipeline is delayed due to economics until 2020. Total net LNG imports grow more slowly with greater domestic production and LNG imports reach 1.2 Tcf by 2020 and 2.1 Tcf by 2025 in this case (Figure 4). The full Annual Energy Outlook 2003, including the reference and all of the alternative case projections along with supplemental tables showing the regional projections and a report on the major assumptions underlying the projections, can be accessed on EIA’s Internet site at http://tonto.eia.doe.gov/FTPROOT/forecasting/0383(2003).pdf.
EIA Program Contact: Scott Sitzer, 202/586-2308, scott.sitzer@eia.doe.gov EIA Press Contact: National Energy Information Center, 202/586-8800, inforctr@eia.doe.gov EIA-2003-01 File Last Modified: January 9, 2003
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