# Presentation: 187406

## The Outlook for Energy MarketsGuy Caruso, AdministratorEnergy Information AdministrationFraser Institute Washington Policy BriefingJune 27, 2008

## World oil markets have become increasingly tight since 2003.

Global demand growth, fed by worldwide economic growth, has exceeded non-OPEC supply growth. 
OPEC and inventories are relied upon to fill the gap, but OPEC production has only risen modestly.  
Geopolitical uncertainty in oil producing countries contributes to risk of supply disruptions. Low levels of surplus production capacity heighten this risk.   
Tight markets are more sensitive to non-fundamental factors. 
To balance the market, prices have risen sharply.

Without a sustained increase in global production capacity, markets are expected to remain very tight. 

Recent experience with non-OPEC supply suggests that OPEC and the NOCs, who together control the vast majority of currently proved reserves, must take the lead in this effort.   

- Global demand growth, fed by worldwide economic growth, has exceeded non-OPEC supply growth.
- OPEC and inventories are relied upon to fill the gap, but OPEC production has only risen modestly.
- Geopolitical uncertainty in oil producing countries contributes to risk of supply disruptions. Low levels of surplus production capacity heighten this risk.
- Tight markets are more sensitive to non-fundamental factors.
- To balance the market, prices have risen sharply.
- Without a sustained increase in global production capacity, markets are expected to remain very tight.
- Recent experience with non-OPEC supply suggests that OPEC and the NOCs, who together control the vast majority of currently proved reserves, must take the lead in this effort.

***Oil market fundamentals are driving the 5-year run-up in prices***

## Oil prices have increase by almost 300 percent since January 2003

- Prior to 2000, oil prices were relatively stable and well below $30 per barrel.
- Starting in 2003, oil prices began climbing due to inventory tightening, increasing world oil demand, and reduced surplus production capacity.

***Oil prices have increase by almost 300 percent since January 2003***

- West Texas Intermediate crude oil, dollars per barrel

*Short-Term Energy Outlook June 2008*

## Despite higher prices, world oil demand growth is strong

- Since 2003, world oil consumption has growth has averaged 1.8 percent per year.
- Non-OECD countries, especially China, India, and the Middle East, represent the largest part of this growth.

**1.0**

**(est.)**

*Short-Term Energy Outlook June 2008*

- growth from prior year, million barrels per day

## ...while overall non-OPEC supply growth has slowed in recent years

***...******while overall non-OPEC supply growth has slowed in recent years***

- In the past 3 years, non-OPEC supply growth has been well below levels seen just 4  years ago.
- Russia drove non-OPEC supply growth during the first part of the decade; however, Russian oil production is down year-over-year in 2008.

*Short-Term Energy Outlook June 2008*

## As a result, the world oil market balance has tightened significantly

- World oil consumption growth has outpaced non-OPEC supply growth every year since 2003.
- This imbalance increases reliance upon OPEC production and/or inventories to fill the gap.

*Short-Term Energy Outlook June 2008*

- growth from prior year, million barrels per day

## World surplus production capacity remains low, leaving world oil markets vulnerable to supply disruptions

*Short-Term Energy Outlook June 2008*

- Current world surplus production capacity is below historic levels.
- In addition, it is highly concentrated in a few countries, with Saudi Arabia holding almost all of this capacity.

- million barrels per day

## World oil prices are expected to decline before rising again

***World oil prices are expected to decline before rising again***

- History

- Projections

- $113

- $69

- $186

*International Energy Outlook 2008*

- nominal dollars per barrel

- High Price

- Reference

- Low Price

## World marketed energy use in the non-OECD will soon surpass that of the OECD

- OECD

- Non-OECD

- History

- Projections

- 241

- 221

- 286

- 409

*International Energy Outlook 2008*

- quadrillion Btu

## Fossil fuels will continue to dominate world energy use

- Liquids

- Natural Gas

- Coal

- 33%

- 29%

- 8%

- Renewables

- Nuclear

- 24%

- 6%

- Share of
- World
- Total

- History

- Projections

- 37%

- 23%

- 27%

- 8%

- 6%

*International Energy Outlook 2008*

- quadrillion Btu

## Unconventional liquids will increase as a share of world production

- Non-OPEC Conventional

- OPEC Conventional

- Unconventional

- Total

- 55

- 10

- 48

- 113

*International Energy Outlook 2008*

- millions of barrels of oil equivalent per day

## U.S. energy prices are expected to decline in the near term, then rise

- Crude Oil

- Electricity

- Coal

- Natural Gas

- Projections

- History

- 2006 dollars per million Btu

*Annual Energy Outlook 2008*

## Liquid fuels continue to dominate primary energy consumption in the United States

***Liquid fuels continue to dominate primary energy consumption in the United States***

*Annual Energy Outlook 2008*

- History

- Projections

- Liquid Fuels

- Natural Gas

- Coal

- Nuclear

- Renewables

- quadrillion Btu

## U.S. crude oil production is primarily from the onshore and deep offshore

- Lower 48 Onshore

- Alaska

- Deep Offshore

- Projections

- History

*Annual Energy Outlook 2008*

- Total

- Shallow Offshore

- million barrels per day

## U.S. dependence on imports of liquid fuels and other petroleum declines by 2030

***U.S. dependence on imports of liquid fuels and other petroleum declines by 2030***

- Consumption

- Domestic Supply

- Net Imports** **

- 60%

- 54%

*Annual Energy Outlook 2008*

- History

- Projections

- million barrels per day

## U.S. dependence on natural gas net imports declines slightly

- 16%

- 14%

- Net Imports

- Consumption

- Production

- Natural Gas Net Imports, 2006 and 2030

*Annual Energy Outlook 2008*

- History

- Projections

- trillion cubic feet

## Unconventional natural gas production will account for nearly half of U.S. supply

- Alaska

- Lower 48 Non-Associated Unconventional

- Lower 48 Non-Associated Offshore

- Lower 48 Associated-Dissolved

- Lower 48 Non-Associated
- Conventional Onshore

- Projections

- History

*Annual Energy Outlook 2008*

- trillion cubic feet

## www.eia.doe.gov

**guy.caruso@eia.doe.gov**

**   **Periodic Reports
***   ****Petroleum Status and Natural Gas Storage Reports*, weekly*  *
*   **Short-Term Energy Outlook*, monthly
*   **Annual Energy Outlook 2008*, March 2008, full report, June 2008
*   **International Energy Outlook 2008*, June 2008, full report, July 2008
**   **Examples of Special Analyses
**    “**Economic Effects of High Oil Prices,” *Annual Energy Outlook 2006*
-     *Analysis of Crude Oil Production in the Arctic National Wildlife Refuge*,
- 	May 2008
-     *The Global Liquefied Natural Gas Market: Status and Outlook, *December 2003
-     “Impacts of Increased Access to Oil and Natural Gas Resources in the Lower 48               	Federal Outer Continental Shelf,” *Annual Energy Outlook 2007*
*    **Energy Market and Economic Impacts of S.2191, the Lieberman-Warner Climate **	**Security Act of 2007*,  April 2008
***    ***
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