# Presentation: 922021

## World Energy Outlook: Near and Mid Term Projections

- Dr. Mark Rodekohr
- Energy Information Administration
- September, 1999

## Near Term Projections

- From the present to 2000.
- Concentration on the World Oil Market.

##  Retail Motor Gasoline Prices*

**0.00**

**0.20**

**0.40**

**0.60**

**0.80**

**1.00**

**1.20**

**1.40**

**1.60**

**1.80**

**2.00**

**199401**

**199407**

**199501**

**199507**

**199601**

**199607**

**199701**

**199707**

**199801**

**199807**

**199901**

**199907**

**200001**

**200007**

** ****Retail Motor Gasoline Prices***

***Regular, Self-Service Cash**

**Dollars per Gallon **

***Projections***

**Sources: History:  EIA;  Projections: Short-Term Energy Outlook, September 1999**

**(Monthly: 1994-2000)**

**Notes:**
  In the September Short-Term Energy Outlook (STEO), that will be released September 7, 1999, retail motor gasoline prices (regular, self-service cash) will have increased by about 33 cents per gallon from February to September of this year.

  EIA believes that pump prices will continue to rise in the year 2000, assuming higher crude costs, averaging about $1.27 per gallon. This could be the highest annual average price in nominal terms since the early 1980’s, but still less than the 1996 average annual price when adjusted for inflation. 

  The motor gasoline price projections have been revised upward since the previous STEO by an average of about 6 cents per gallon, due to higher crude oil price path assumptions. 
  A large uncertainty behind this forecast is what OPEC will do at their September meeting.  In the STEO, it is assumed that OPEC will not increase their production quotas at the September meeting.  However, the forecast also assumes that OPEC production increases from current levels during the winter period.

##  Monthly World Crude Oil Prices

**2000**

**1999**

**1998**

**1997**

**1996**

**0.00**

**5.00**

**10.00**

**15.00**

**20.00**

**25.00**

**30.00**

**1996**

**1997**

**1998**

**1999**

**2000**

**Current Dollars per Barrel**

**History**

**Cases**

**Price Difference: WTI vs.**

**  ****Imported RAC**

**(Dollars per Barrel)**

**1995         1.26**

**1996         1.54**

**1997         2.06**

**1998(e)     2.37**

**West Texas Intermediate**

**Import Cost**

**(RAC)**

**Mid**

**Low**

**High**

** ****Monthly World Crude Oil Prices**

**Sources: History:  EIA;  Projections: Short-Term Energy Outlook, August 1999**

**Notes:**
  EIA believes that prices will rise from average August levels (an estimated $19.50 per barrel for the price paid by U.S. refiners for imported crude oil or $21.28 per barrel for West Texas Intermediate crude oil) by $1.50 to $2 per barrel by the December through March 2000 period. Then, throughout most of 2000, monthly world oil prices are expected to be between $20.00-$21.00 per barrel (which would translate into a WTI crude price of about $22.00-$23.00 per barrel). Our normal uncertainty range for crude oil prices suggest that expected end-2000 prices would be within about $3-$3.50 of the $22.50-$23.00 per barrel level (for WTI) with a high degree of probability.
  This reflects our assumptions concerning OPEC crude oil production. EIA is forecasting that OPEC compliance will be relatively strong through at least September, before declining slightly during the winter. Strong compliance with cuts in OPEC production should reduce global inventories, thus putting pressure on prices to rise over the rest of 1999.  Crude oil prices are expected to remain at relatively high levels throughout next year.

## Slide 5

**Notes:**
  While world stock changes are implied from estimates of world supply and demand, OECD stocks are measured, and thus are an important indicator to oil markets.  

  In 1996, we saw OECD stocks drop below the prior 6-year average levels as price incentives discouraged stocking.  At the end of winter 1995/1996, stocks had been depleted from cold weather, and a late cold snap sent near-term crude prices upward, while expectations of Iraqi crude oil entering the market kept futures term structures in steep backwardation.  With low stocks going into the winter 1996/1997, prices went even higher until Iraqi crude oil finally did enter the market.

  The market then turned around.  The subsequent slowdown in demand growth from the Asian financial collapse and warm weather coupled with continued increases in supplies from both OPEC and non-OPEC sources caused a severe over-supply problem, building stocks to very high levels in 1998 as prices plummeted.

  In 1999, we began the year even higher than in 1998, but we are seeing signs of stocks being worked off.  We began 1999 about 100 million barrels over 1998, but preliminary data indicate stocks are already below last year’s levels, with forecasts of further declines by year’s end.

## Slide 6

**Notes:**
  In a normally balanced market, one expects a net zero stock change over a 12- month period.  But most forecasters are predicting net draws over the 12 months beginning of April 1, 1999, when OPEC made its most recent oil production cuts -- using up the excess world stocks that built over the last several years. 

  Estimates of global excess oil stocks at the beginning of the most recent OPEC oil production cuts (April 1, 1999) range anywhere from 200 to 400 million barrels.  Looking at cumulative drawdowns in EIA’s Short-Term Energy Outlook, along with projected oil stock drawdowns from the International Energy Agency and Energy Intelligence Group (Petroleum Intelligence Weekly, Oil Daily, etc.), all scenarios point to more oil being drawn from inventories than even the highest estimate of global excess stocks at the end of the first quarter of 1999, indicating the possibility of a very tight oil market this coming winter.

  Three EIA scenarios were analyzed.  The first, labeled EIA STEO, is the current estimate from EIA’s Short-Term Energy Outlook (STEO).  It assumes OPEC compliance with agreed upon cuts of over 80 percent in the 2nd and 3rd quarters of 1999, before declining to 77 percent and 72 percent respectively in the 4th quarter of 1999 and the 1st quarter of 2000.  The scenario labeled EIA 85% assumed OPEC compliance at 85% during the winter (4th quarter of 1999 and 1st quarter of 2000).  The third scenario assumed a 90% compliance in the winter period.  All EIA scenarios indicated stocks being drawn down much more than the estimated excess of global oil stocks.

##  OPEC Compliance to Agreed Upon

** ****OPEC Compliance to Agreed Upon**
**Cuts in Production**

**Notes:**
  Currently, EIA is estimating that OPEC (excluding Iraq) will have cut over 80 percent of agreed upon oil production cuts in the 2nd and 3rd quarters of 1999.  Then, beginning with the 4th quarter of 1999, and continuing through the end of the winter period, OPEC is expected to increase production (decrease compliance rates with production cuts).  With stocks likely to be drawn down below “normal” levels sometime this winter, there should be room in the oil market for this production increase to occur without causing prices to decline.  In fact, EIA forecasts WTI prices will be over $23 per barrel during most of the winter, even with the assumed increases in OPEC production detailed here.

  The chart also depicts OPEC (excluding Iraq) crude oil production if OPEC compliance with agreed upon cuts were at 85 percent of 90 percent instead of the production levels assumed in EIA’s Short-Term Energy Outlook (STEO).  OPEC crude oil production would be significantly less at these levels of compliance, thus tightening up the market even further than assumed in EIA’s STEO.

## Mid-Term Projections

- While all energy markets are discussed the transportation sector is emphasized due to its importance to U.S. markets
- Projections go through 2020.

## World Energy Consumption, 1970-2020

- Source:  EIA, International Energy Outlook 1999

## World Gross Domestic Product by Region, 1970-2020

- Source:  EIA, International Energy Outlook 1999

## World Energy Consumption by Region, 1970-2020

- Source:  EIA, International Energy Outlook 1999

## World Energy Consumption by Fuel Type, 1970-2020

- Source:  EIA, International Energy Outlook 1999

## World Carbon Emissions by Region, 1970-2020

- Source:  EIA, International Energy Outlook 1999

## Petroleum Use for Transportation and Other Purposes, 1980-2020

- Source:  EIA, International Energy Outlook 1999

## Transportation’s Share of Primary Energy Use, 1980-2020

- Source:  EIA, International Energy Outlook 1999

## Transportation Energy Use by Region, 1990, 1996, and 2020

- Source:  EIA, International Energy Outlook 1999

## World Transportation Energy Use by Fuel, 1980-2020

- Source:  EIA, International Energy Outlook 1999

## Transportation Energy Use in the Industrialized Countries, 1980-2020

- Source:  EIA, International Energy Outlook 1999

## Transportation Energy Use in the EE/FSU, 1980-2020

- Source:  EIA, International Energy Outlook 1999

## Transportation Energy Use by Fuel in the Developing World, 1980-2020

- Source:  EIA, International Energy Outlook 1999

## Transportation Energy Use by Mode, 1980-2020

- Source:  EIA, International Energy Outlook 1999

## Transportation Energy Use by Mode in the Industrialized Countries, 1980-2020

- Source:  EIA, International Energy Outlook 1999

## Transportation Energy Use by Mode in the EE/FSU, 1980-2020

- Source:  EIA, International Energy Outlook 1999

## Transportation Energy Use by Mode in the Developing World, 1980-2020

- Source:  EIA, International Energy Outlook 1999

## Road Vehicle Populations by Region, 1996 and 2020

- Source:  EIA, International Energy Outlook 1999

## Annual Energy Use Per Capita in the Transportation Sector, by Region, 1980, 1996, and 2020

- Source:  EIA, International Energy Outlook 1999

## Motorization in Selected Countries and Regions, 1995

- Source:  EIA, International Energy Outlook 1999

## Motorization Rates in Selected Regions and Countries, 1996 and 2020

- Source:  EIA, International Energy Outlook 1999

## Motorization Trends in Selected Industrialized Countries, 1980-2020

- Source:  EIA, International Energy Outlook 1999

## Motorization Trends in Selected Developing Countries, 1980-2020

- Source:  EIA, International Energy Outlook 1999

## Vehicle Population in Three Economic Growth Cases, 2020

- Source:  EIA, International Energy Outlook 1999

## EIA’s Outlook for the International Transportation Sector