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# OAR Box 1669 Prepped by Charmelle Mathews



## Document

Number: 

# 106 ) 11-1-1 4 Docket Number: 

# A-98-1 3

Printed 9/23/20089:36:50AM

Sheet 106 of UOP. 2



### Annua l Energy Outloo

k 199 9 

# Repor t Content s [Report* : DOE/EIA-038 3

(") 1 Prefac e 

## MA R 

## " 6 200 1 Pag e 1 o t 3 

# Jl-JT-IH, Ann.d l Fnflfffl'Wfirlnni k ]°99 

# Wit h Projection s t o 202 0
(Errat a as o f 9/9/1999 ) Th e Annual Energy outlook

1999 {AE099) presents midter m forecasts of energ ysupply , demand , an d price s throug h 202 0 prepare d b yth e Energy

. _ ^ M Informatio n Administratio n (EIA)
. Th e projection s are base d o n results fro m Prefac e ElA' s Nationa l EnergyModelin g Syste m (NEMS)
.

• Administrator' s Messag e

• Overvie w

• Legislatio n & Regulation s Issue s i n Focu s

• Marke t Trend s

• Forecas t Comparison s

• Majo rAssumption s fo rth e Forecast s

" Mode l Result s (Appendi xTables )

" Downloa d Report

• Acronym s

• Contact s Th e repor t begin s wit h a n "Overview " summarizin g th e AE099 reference case . Th e nex t section , "Legislatio n an d Regulations, " describe s th e assumption s mad e wit h regar

d t o law s that affec

t energ ymarkets an d discusse s evolvin g legislative an d regulator

yissues
. "Issue s i n Focus " discusse s curren t energy issues—th e economi c declin e i n Eas t Asia , growt h i n deman d fo rnatura l gas , vehicl e emission s standards , competitiv e electricit

ypricing , renewabl e portfoli o standards , an d carbo n emissions
. I t i s followe d b yth e analysi s o f energ y market trends
. Th e analysi s i n AE099

focuse s primaril yo n a referenc e cas e an d fou rothe r case s that assum e highe ran d lowe reconomi c growt h an d highe ran d lowe r worl d oi l price s tha n i n th e reference case . Forecast table s fo rthes e case s are provide d i n Appendixe s A throug h C
. Appendixe s D an d E presen t a summar y of th e reference cas e forecast s i n units of oi l equivalenc e an d househol d energ y expenditures
. Othe rcase s explor e th e impacts of varyin g ke yassumption s i n NEMS-^generally , technolog ypenetration
. Th e majo rresult s are show n i n Appendi xF
. Appendi xG briefl ydescribe s NEM S an d th e AE099 assumptions , wit h a summar

ytabl e o f th e cases . Appendi xH provide s table s o f energ y an d metri c conversio n factors
. AE099, th e detaile d assumptions , an d ' supplementar

ytable s wil l b e availabl e o n th e EI A Hom e Pag e an d o n CD-ROM
. Th e AE099

projection s ar

e base d o n Federal , State , an d loca l law s an d regulation s i n effec

t o n Jul y1,1998
. Pendin g legislatio n an d section s of existin g legislatio n fo rwhic h fund s hav e not bee n appropriate d are no t reflecte d i n th e forecasts
. Historica l data use d forth e AE099 projection s wer

e th e mos t curren t availabl e as o f Jul y31,1998 , whe n mos t 199 7 dat a bu t onl ypartia l 199 8 dat a wer e available
. Historica l dat a ar e presente d i n thi s repor

t forcomparative purposes ; documents reference d i n th e source note s shoul d b e consulte d fo r officia l values
. Th e AE099 projection s fo r199 8 an d 199 9 incorporat e th e short - .ter m projection s fro m th e Septembe rupdate o f ElA' s Short-Term Energy Outlook (STEO), Third Quarte r1998
. Th e AE099

projection s ar

e used b yFederal , State , an d loca l governments , trad e associations , an d othe rplanner s an d decisionmaker

s i n th e publi c an d privat e sectors . Theyare publishe d i n accordanc e wit h Sectio n 205 c o f th e Departmen t of EnergyOrganizatio n Ac t of 1977 (Publi c La

w 9591) , whic h require s th e Administrato ro f EI A t o prepar e a n annua l repor

t that contain s trend s an d projection s of energ yconsumptio n an d supply
. Feedbac k 

## Relate d Link

s

" Assumption s t o th e AEQ9 9 Th e projection s i n AE099 are no t statements o f what wil l happe n bu t o f wha t migh t happen , give n th e assumption s an d methodologie s used
. Th e projection s are business-as-usua l tren d forecasts , give n know n technology , technologica l an d demographi c trends , an d curren t law s an d regulations
. Thus , theyprovid e a policy-neutra l referenc e cas e that ca n b e use d t o analyz e polic

yinitiatives
. EI A doe s not propose , advocate , o rspeculat e o n future legislative an d regulator ychanges
. Al l laws are assume d t o remai n a s currentl yenacted ; however , th e impacts o f emergin g regulator ychanges , whe n defined , are reflected
. Becaus e energ ymarkets are complex , model s ar e simplifie d representation s 

### http://www.eia.doe.gov/oiaf/aeo99/homepage.htm l 1/2/0 1 /

### Annual Energ y Uutloo k 199 9 Pag e 2 o f 3

' Interactiv e Dat a Querie s t o th e AE09 9

" Supplementa l Dat a t o th e AEQ9 9

' NEM S Conferenc e

• T o Forecastin g Hom e Pag e

" EI A Homepag e Becaus e energymarket s ar e complex , model s ar

e simplifie d representation s o f energ yproductio n an d consumption , regulations , an d produce ran d consume rbehavior
. Projection s ar e highl ydependen t o n th e data , methodologies , mode l structures , an d assumption s use d i n thei rdevelopment
. Behaviora l characteristics ar e indicativ e o f real-worl d tendencie s rathe rtha n representation s o f specifi c outcomes . Energymarket projection s ar e subjec t t o much uncertainty
. Manyof th e event s tha t shap e energymarket s ar e rando m an d canno t b e anticipated , includin g sever

e weather , politica l disruptions , strikes , an d technologica l breakthroughs
. I n addition , futur e development

s i n technologies , demographics , an d resource s canno t b e foresee n wit h an ydegre e o f certainty
. Manyke

yuncertaintie s i n th e AE099 projection s ar

e addresse d throug h alternative cases . EI A ha s endeavore d t o mak

e thes e projection s a s objective , reliable , an d usefu l as possible ; however , the yshoul d serv

e a s a n adjunc

t to , not a substitut e for , analytica l processe s i n th e examinatio n o f polic yinitiatives
. 

### Administrator' s Messag e A s w e presen t th e projection s i n th e Annual Energy Outlook 1999 (AE099), i t i s importan t t o clarif

ywha t thes e projection s represent . Whil e th e reference cas e projection s d o not hypothesiz e radica l change s i n energ ymarkets an d energy usin g an d producin g technologies , the yd o assum e continuin g market change s an d improvements i n energ ytechnologies , derive d fro m past trends
. Th e Energ yInformatio n Administratio n (EIA) endeavor s t o represen t curren t energ ymarket conditions , bot h domesti c an d worldwide , an d thei rimpacts o n future energ ytrends
. A n importan t exampl e of suc h transitor yissue s i s th e ongoin g economi c crisi s i n Eas t Asia , whic h currentl yi s depressin g worl d oi l deman d an d price s an d domesti c oi l production
. Anothe ri s th e continuin g restructurin g of th e U.S
. electricit yindustr yan d th e movemen t t o competitive pricin g of electricity
. Bot h o f thes e topics are feature d i n AE099, an d theyar e include d i n th e reference cas e projections
. I n additio n t o th e longer-ter m impact s o f curren t market transitions , th e reference cas e projection s als o includ e th e impact s o f a numbe ro f potentia l change s i n energ ymarkets—mos t notably , technology
. Substantia l productivit y improvements an d othe rtechnologica l advance s are assume d fo rth e fossi l fue l suppl ysectors , i n accordance wit h recen t historica l trends , accountin g i n par t fo rth e declin e o

f coa l price s an d th e relativel ymodes t increase s i n oi l an d natura l ga s price s i n th e projections
. Th e projection s als o incorporat e al l ne w an d advance d energy-consumin g an d generatin g technologie s tha t are assume d wit h a reasonabl e degre e of confidence t o b e availabl e b y2020
. A s a result , energ yintensity—th e amoun t of energ yuse d fo reac h dolla ro f outpu t i n th e economy—decline s b y a n averag e o f 1 percen t a yea rthroug h 2020
. I n contrast , fro m 1986 t o 1996 , energyintensit ywa s essentiall yfla t Becaus e th e future cannot b e know n wit h certainty , i t i s possibl e tha t an yo f th e assumptions , includin g th e availabilit yan d characteristics o f technology , ma y b e to o optimisti c o rpessimistic
. Fo rthat reason , AE099 include s a wid e rang e o f alternative case s examinin g th e effect s of variation s i n man yke y assumptions
. A s a policy-neutra l organization , EI A doe s not incorporat e futur e change s i n energy-relate d legislation , regulation , o rpolic yinto it s projections
. Becaus e of thi s neutralit

yan d th e "mos t likely " natur e of th e energ ytrends , th e reference cas e projection s provid e a soli d baselin e against whic h a variet yo f alternative policie s an d assumption s ca n b e analyze d an d evaluated
. On e exampl e o f th e analytica l wor k

performe d b

y EI A relative t o it s referenc e projection s ove rth e past severa l year

s i s th e recen t report , Impacts of the Kyoto Protocol

on U.S. Energy Markets and Economic

Activity, prepare d a t th e request o f th e U.S
. Hous e o f Representative s Committe e o n Science
. Othe rrecen t wor k includes : 

### http://www.eia.doe.gov/oiafaeo99/homepage.htm l 1/2/0 1P. 4



### Annua l Energy uutioo k

lyy y Page 3 of 3

• Analysis

of S. 687, the

Electric System Public Benefits Protection

Act of 1997, a t th e reques

t o f Senato rJame s M
. Jefford s • An Analysis ofFERC's

Final Environmental Impact

Statement

for Electricity

Open Access and Recovery

of Stranded

Costs, als o a

t th e reques t of Senato rJefford s • The Impacts on

U.S. Energy

Markets and the Economy

of Reducing

Oil Imports, fo rth e U.S
. Genera l Accountin g Office • Analysis

of Carbon Stabilization

Cases, fo rth e U.S
. Departmen t of Energy , Office o

f Polic yan d Internationa l Affair

s • The Impacts of Increased

Diesel Penetration

in the Transportation Sector, fo rth e U.S
. Departmen t of Energy , Office of Energ yEfficienc y an d Renewabl e Energy
. Ja y E . Hake s Administrato r Energy Informatio n Administratio n
I f yo u woul d lik

e t o receive d an yinformatio n relatin g t o anyof ou rreports vi a e-mail , clic k o n th e lin k

labele d "Projection s ListServ " t o Joi n b yenterin g you re-mai l address
. Fil e las t modified : Septembe r9,199 9 URL : http://www.eia.doe.gov/oiaf/aeo99/homepage.htm l

Need Hel p Now? Cal l th e Nationa l EnergyInformatio n Cente r(NEIC ) (202 ) 586-880 0 9A M - 5P M easter n tim e Specialize d Service s from NEI C I f yo u ar e havin g technica l problem s wit h thi s site , pleas e contac t th e EI A Webmaste rat wmaster@eia.doe.go v



### http://www.eia.doe.gov/oiafaeo99/homepage.htm l 1 /2/0 1P. 5



### Annual Energ y Uutloo k

1 y9 9 - Overvie w Pag e 1 of 6 

## Repor t Content s [Report* : DOE/EIA-038 3 (99) ]
> Preface 

# Overview Ke y Issues A majo rissu e i n energ ymarkets toda yi s carbo n emissions
. Becaus e th e Kyoto Protoco l ha

s no t bee n ratifie d b

yth e Unite d State s an d n o specifi c policie s fo r carbo n reductio n hav

e bee n enacted , suc h policie s ar e no t include d i n th e Annual Energy Outlook 1999 {AE099), althoug h th e Protoco l an d ElA' s recen t analysi s of it s potentia l impacts are discussed
.
" Administrator' s Messag e



### • Overvie w

* Legislatio n & Regulation s

•Issues i n Focu s

•Marke t Trend s

" Forecas

t Comparison s Economi c development s i n Asi a ove rth e pas

t 1 8 month s hav

e weakene d worldwid e oi l deman d an d lowere d worl d oi l prices— a tren d that i s likel yt o continu e fo rsevera l year

s and , therefore , i s include d i n th e AE099 analysi s of oi l markets an d prices
. A s i n AE098, th e projection s i n AE099 reflec t ongoin g change s i n th e financia l structure o

f th e U.S
. electricit

yindustr yan d cost reduction s tha t are becomin g eviden t wit h increase d competition
. A transitio n t o retai l competitive pricin g i s assume d i n fiv e regions—California , Ne w York , Ne

w England , th e Mid-Atlanti c Are a Counci l (Pennsylvania , Delaware , Ne w Jersey , an d Maryland) , an d th e Mid-America Interconnecte d Networ k (Illinoi s an d parts o

f Wisconsi n an d Missouri)
. Provision s of th e Californi a legislatio n o n strande d cost recover yan d pric e cap s ar

e als o included
. I n th e othe rregions , strande d cost recover yi s assume d t o b e phase d ou t b y2008
. N o nationa l renewabl e portfoli o standar d has bee n passed , bu t Stat e standard s an d othe rprogram s intende d t o encourag e renewable s ar e include d a s enacted
. Th e ne w standard s fo rcontro l o f nitroge n oxid e (NOx

) emission s b

yelectricit ygenerator

s ar e als o incorporated
. Prices •Majo r Assumption s fo r th e Forecast

s

•Mode l Result

s (Appendi x Tables )

•Download Repor

t

•Acronym s



### • Contact

s Althoug h averag e worl d crud e oi l price s i n AE099 are simila rt o thos e i n AE098 b y2020 , th e projecte d price s ove rth e nex t severa l year

s are muc h lowe r(Figur

e 1)
. I n 2020 , th e averag e crud e oi l pric e i s projecte d t o b e $22.7 3 a barre l (i n 1997 dollars) , compare d wit h $22.7 8 a barre l i n AE098. Wit h th e economi c downtur n i n manyAsia n nation s an d lowe rexpecte d growt h i n worl d oi l demand , worl d oi l price s are expecte d t o remai n lo w ove rth e nex

t severa l years—a s muc h a s abou t $5.5 0 a barre l lowe rtha n las t year' s projection s i n 2000
. Figur e 1
. Fue l pric e projections
. 1997-2020 : AEQ9 8 an d AEQ9 9 compare d (199 7 dollars ) [sources ] Afte rth e star

t o f th e nex

t decade , worl d oi l deman d i s expecte d t o rebound
. Worldwid e deman d fo roi l i s projecte d t o reac h 114. 7 millio n barrel s a da yi n 2020 , onl yslightl ylowe rtha n th e AE098 projectio n o f 116. 6 millio n barrel s a day
.

" Feedbac k 

## Relate d Link

s

•Assumption s t o th e AE09 9 Throug h 2020 , th e relativel ylow growt h o f price s eve n a s th e deman d fo roi l increase s reflect s continue d optimis m abou t th e potentia l growt h o f productio n i n bot h th e Organizatio n o f Petroleu m Exportin g Countrie s (OPEC ) an d th e non OPE C nations
. Althoug h not increasin g a s rapidl ya s i n AE098, OPE C oi l productio n i s expecte d t o reac h 58. 8 millio n barrel s a da yi n 2020 , nearl y doubl e th e 29. 9 millio n barrel s a da yi n 1997 , assumin g sufficien t capita l t o expan d productio n capacity
. Once sanction s are lifted , Iraq i oi l productio n i s expecte d t o reac h 2. 5 millio n barrel s a da ywithi n 2 years an d abou t 5 millio n barrel s a da

ywithi n a decade
. Outsid e th e Persia n Gulf , expansio n o f productio n i n th e offshore region s of Nigeri a an d Algeri a an d i n Venezuel a shoul d mak

e a significan t contributio n t o OPE C production
.


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# fP. 6



### Annua l tnerg y uutloo k

19y y - Overvie

w Page 2 of 6

' Interactiv

e Dat a Queries t o th e AE09 9

•Supplementa l Dat

a t o th e AE09 9

' NEM S Conference

•T o Forecastin g Hom e Pag e

•EIA Homepag e Non-OPE C oi l productio n i s expecte d t o increas e mor e rapidl yi n AE099, reachin g 55. 6 millio n barrel s a da yi n 2020 , compare d wit h 50. 4 millio n barrel s a da yi n AE098. Contributin g t o th e growt h ar e a nea rdoublin g o

f productio n i n th e forme rSoviet Unio n b y202 0 (primaril yi n th e Caspia n Sea oi l fields) , ne w field s i n th e Nort h Sea , an d increase s i n th e offshor e region s of Wes

t Africa
. Mexica n oi l productio n wil l continu e t o expand , an d th e rest o f Lati n America i s projecte d t o increas e productio n b ymor e tha n 5 0 percent , particularl yi n Brazi l an d Colombia
. Lowe rOPE C productio n an d highe rnon-OPE C productio n tha n i n AE098 mea n tha t OPE C doe s no

t dominat e th e worl d oi l marke t unti l late ri n th e forecast an d reache s a market shar e of onl y5 1 percent , compare d wit h 5 7 percen t i n AE098. Th e averag e wellhea d price of natura l ga s i s projecte d t o increas e fro m $2.2 3 pe rthousan d cubi c fee t i n 199 7 t o $2.6 8 pe rthousan d cubi c fee t i n 2020 , a n averag e annua l growt h rat e o f 0. 8 percent . Continue d technologica l improvements i n th e exploratio n an d productio n o f natura l gas moderate th e pric e increas e eve n a s deman d grows rapidly
. I n 2020 , th e pric e i s highe rtha n th e $2.5 9 projecte d i n AE098, primaril ybecaus e of a lowe rassessmen t of th e recoverabl e resource base
. Averag e delivere d price s declin e betwee n 199 7 an d 202 0 a s a resul t o f efficienc yimprovements i n transmissio n an d distribution ; however , margin s ar

e as muc h a s $0.2 0 t o $0.3 0 pe rthousan d cubi c fee t highe r i n AE099 tha n i n AE098

i n th e 200 0 t o 201 0 period , becaus e recen t dat a indicat e fewe rpipelin e an d distributio n cos t reduction s tha n previousl y assumed
. I n AE099, th e averag e minemout h pric e of coa l i s projecte d t o declin e fro m $18.1 4 pe rto n i n 1997 t o $12.74 pe rto n i n 2020 , as a resul t of increasin g productivit yi n th e industry , mor

e productio n fro m lower-cost wester n mines , an d competitive pressure s o n labo rcosts . Slightl ylowe rproductio n an d highe r productivity , a s note d i n recen t data , lea d t o a pric e that i s lowe rtha n th e $13.5 5 i n AE098. Averag e electricit

yprice s declin e fro m 6. 9 cent s pe rkilowatthou ri n 1997 t o 5. 6 cent s pe rkilowatthou ri n 2020 , th e sam e a s i n AE098. Th e restructurin g o f th e electricit yindustr ycontribute s t o declinin g price s throughou t th e Natio n throug h lowe roperatin g an d maintenance costs , lowe radministrative costs , an d othe r cos t reductions
. Federa l EnergyRegulator yCommissio n action s o n ope n acces s an d othe rregulator yinitiative s fo rcompetitive markets enacte d b ysom e Stat e publi c utilit

ycommission s are include d i n th e projections , a s are renewabl e portfoli o standard s an d othe rmandate s that have bee n passe d i n som e States
. Legislative action s affectin g th e electricit yindustr yare discusse d i n th e "Legislatio n an d Regulations " sectio n o f thi s report , an d electricit ypricin g i s discusse d i n "Issue s i n Focus. " Consumptio n Tota l U.S
. energ yconsumptio n i s projecte d t o increas e fro m 94. 0 t o 119. 9 quadrillio n Britis h therma l units (Btu ) betwee n 199 7 an d 2020 , a n averag e annua l increas e o f 1. 1 percent . I n 2020 , consumptio n i s slightl yhighe rtha n th e 118. 6 quadrillio n Bt u projecte d i n AE098, wit h highe rcommercial , industrial , an d transportatio n deman d partiall yoffse t b ylowe rresidentia l demand
. Consumptio n i n th e residentia l an d commercia l sector s i s projecte d t o increas e at averag e rate s of 0. 8 an d 0. 7 percen t a year , respectively , le d b ygrowt h fo ra variet yo f equipment—telecommunications , computers , an d othe rappliances
. Residentia l deman d i s lowe rtha n i n AE098— 22.9 quadrillio n Bt u i n 2020 , compare d wit h 23. 2 quadrillio n Btu , becaus e mor e efficien t buildin g shell s i n ne w constructio n offset highe rgrowt h i n th e housin g stock
. I n th e commercia l sector , data fro m th e Commercial Buildings

Energy Consumption

Survey 1995 indicat e les s floorspac e bu t highe renerg yintensitie s forsom e en d uses . Commercia l deman d i s projecte d t o b e 18. 1 quadrillio n Bt u i n 2020 , 0. 6 quadrillio n Bt u highe rtha n i n AE098, primaril ybecaus e o f highe rdeman d fo r natura l gas an d electricity
. 

### http://www.eia.doe.gov/oiaf/aeo99/overview.htm l 1/2/0 1 

# . 5

### Annua

l Energy Outlook

1999 - Overview
Deman d i n th e industria l secto rincrease s a t a n averag e of 0. 8 percen t a yea r an d i s abou t 0. 6 quadrillio n Bt u highe ri n 202 0 tha n i n AE098. Mor e rapi d efficienc yimprovemen t i n som e manufacturin g sector s i s offset b

yhighe r energyintensit

yindicate d b

yth e Manufacturing

Energy Consumption

Survey 1994. Becaus e th e economi c downtur n i n Asi a affect s th e market fo rU.S
. exports , manufacturin g outpu t an d industria l deman d are significantl ylowe r tha n i n AE098

ove rth e nex

t 1 0 years , reboundin g late ri n th e projections
. Transportatio n deman d grow s o n averag e b

y1. 7 percen t a yea ran d i s 0. 4 quadrillio n Bt u highe ri n 202 0 tha n i n AE098. Th e introductio n o f direct-injectio n engine s an d othe radvance d automotive technologie s improve s th e efficienc yo f light-dut yvehicles , bu t th e improvemen t i s mor e tha n offse t b

yhighe rtravel , resultin g fro m highe rprojecte d persona l income
. Recen t dat a indicat e highe r load factor

s an d efficienc

yfo raircraft , whic h are offse t b ymor e ai rtravel
. Freigh t requirements fo rbot h rai l an d truck s are als o higher , primaril ybecaus e of th e highe reconomi c growt h projecte d i n AE099. AE099, lik

e earlie rAEOs , incorporate s efficienc ystandard s fo rne

w energy usin g equipmen t i n building s an d fo rmotor s mandate d b

yth e Nationa l Applianc e Energ

yConservatio n Ac

t o f 1987 an d th e EnergyPolic yAc t of 1992
. Severa l alternative case s examin e th e impac t o f technolog yo n th e projection s b yassumin g mor

e an d les s rapi d improvemen t of energy-efficien t technologie s i n th e end-us e sector

s relative t o that projecte d i n th e reference case . Natura l gas consumptio n increase s b ya n averag e o f 1. 7 percen t a yea r(Figur e 2)
. Deman d increase s i n al l sectors , bu t th e mos t rapi d growt h i s fo relectricit y generation , whic h i s projecte d t o increas e fro m 3. 3 t o 9. 2 trillio n cubi c fee t betwee n 1997 t o 2020 , excludin g cogenerators . Tota l ga s consumptio n i s onl y 0. 1 trillio n cubi c fee t highe rtha n i n AE098 i n 2020 , wit h highe rdeman d i n th e commercia l an d industria l sector s offset b ylowe rdeman d i n th e residentia l an d electricit ygeneratio n sectors . Figur e 2
. Energyconsumptio n b yfuel , 1970-202 0 (quadrillio n Btu ) [sources ] Coa l consumptio n increase s fro m 1,03 0 t o 1,27 5 millio n ton s betwee n 199 7 an d 2020 , a n averag e annua l increas e of 0. 9 percent . Abou t 9 0 percen t o f th e coa l us e i s fo relectricit

ygeneration , an d coa l remain s th e primar yfue l fo r generation , althoug h it s shar e of generatio n decline s b y2020
. Coa l deman d i n 202 0 i s 1 8 millio n ton s highe rtha n i n AE098 becaus e o f highe rprojecte d deman d fo relectricit

ygeneration
. Petroleu m deman d i s projecte d t o gro w a t a n averag e rat e o f 1. 2 percen t a yea r throug h 2020 , le d b

ycontinue d growt h fo rtransportation , whic h account s fo r abou t 7 0 percen t o f petroleu m us e i n 2020
. Increase s i n trave l mor e tha n offse t efficienc yincreases , an d highe reconomi c growt h increase s freigh t an d shipping , an d thu s petroleu m use , throug h 2020
. Compare d wit h AE098, tota l transportatio n energ ydeman d i s slightl yhigher , wit h highe rprojecte d efficiencie s fo rne

w automobile s an d aircraf t mor e tha n offse t b

yhighe rtrave l an d freigh t requirements
. Renewabl e fue l consumption , includin g ethano l use d fo rblendin g i n gasoline , increase s a t a n averag e rat e o f 0. 8 percen t a yea rthroug h 2020
. Abou t 6 0 percen t o f renewable s are use d fo relectricit ygeneratio n an d th e res t for disperse d heatin g an d cooling , industria l uses , an d fue l blending
. I n 2020 , renewable s are 0. 7 quadrillio n Bt u highe rtha n i n AE098, wit h highe rdeman d fo relectricit

ygeneration , industria l uses , an d ethano l blending
. Electricit ydeman d i s projecte d t o grow b y1.4 percen t a yea rthroug h 2020
. ^Efficienc ygain s i n th e us e o f electricitypartiall yoffse t th e growt h o f ne w electricity-usin g equipment
. Electricit ydeman d i s onl yslightl yhighe rtha n i n AE098, becaus e a n increas e i n commercia l demand , resultin g from mor e rapi d growt h o f office equipment , computers , an d othe rappliance s i s offse t b ya decreas e i n industria l deman d fro m efficienc yimprovements i n som e 

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### Annual Energ y Outloo k

199 9 - Overvie w Pag e 4 o f 6 manufacturin g industries
. Energ yIntensit y Energyintensity , measure d a s energ yus e pe rdolla ro f gros s domesti c produc t (GDP) , ha

s decline d since 1970 , particularl ywhe n energ yprice s hav e rise n rapidl y(Figur

e 3)
. Betwee n 1970 an d 1986 , energ yintensit ydecline d a

t a n averag e rate o f 2. 3 percen t a yea ras th e econom yshifte d t o les s energyintensive industrie s an d mor e efficien t technologies
. Wit h moderate price increase s an d th e growt h o f mor e energy-intensive industries , intensit y improvement

s wer e flat betwee n 1986 an d 1996
. Fro m 1997 t o 2020 , intensit y i s projecte d t o improve a

t a n averag e rat e of 1. 0 percen t a yea ras efficienc y gain s an d structura l shift s i n th e econom yoffse t growt h i n deman d fo renerg y services
. Energyus e pe rperso n als o decline d fro m 1970 throug h th e mid-1980s , the n increase d as energ yprice s dropped
. Pe rcapit a energ yus e i s expecte d t o remai n stabl e throug h 202 0 an d belo w th e hig h i n th e earl y1970s , as efficienc y gain s offse t highe rdeman d fo renerg yservices
. Figur e 3
. Energyus e pe rcapit a an d pe rdolla ro f gros s domesti c product
. 1970 - 202 0 (index
. 197 0 = 1 ) [sources ] Electricit y Generatio n Electricit ygeneratio n fro m nuclea rpowe rdecline s significantl yove rth e projectio n perio d (Figur

e 4)
. Of th e 9 9 gigawatts o f nuclea rcapacit yavailabl e i n 1997 , 5 0 gigawatts are retired , an d n o ne w plants are constructe d b y2020
. Nuclea rplan t retirement s are base d o n analyse s o f operatin g cost s an d th e cost s of lif e extensio n compare d wit h th e cos t of ne w generatin g capacity
. A s a result , som e plants are retire d befor e th e en d o f thei r40-yea roperatin g licenses
. Figur e 4
. Electricit

ygeneratio n b

yfuel
. 1970-202 0 (billio n kilowatthours ) f sources ] Generatio n from bot h natura l ga s an d coa l i s projecte d t o increas e throug h 202 0 t o mee

t growin g deman d fo relectricit yan d offse t th e declin e i n nuclea r power . Coa l price s are lowe rtha n i n AE098, leadin g t o slightl yhighe rcoa l generation , bu t th e shar

e of coa l generatio n decline s b y202 0 becaus e assumption s abou t electricit yindustr yrestructurin g favo rth e constructio n o f les s capital-intensive an d mor e efficien t natura l ga s generatio n technologies
. Th e naturalga s generatio n share increase s from 1 4 percen t t o 3 3 percen t betwee n 1997 an d 2020
. Th e ne w NO xstandard s lea d t o th e installatio n o f contro l technologie s at many , plants , wit h annualize d cost s o f $2 billion , compare d wit h $20 0 billio n i n annua l electricit yexpenditures
. Renewabl e generation , includin g cogenerators , increase s b y0. 5 percen t a yea r an d i n 202 0 i s 1 1 percen t highe rtha n i n AE098. Renewabl e technologie s penetrat e slowl ybecaus e o f th e relativel ymodest increas e i n natura l ga s price s an d th e decreas e i n coa l prices
. I n addition , electricit yrestructurin g tend s t o favo rnatura l ga s ove rcoa l an d baseloa d renewabl e technologies
. Stat e renewabl e portfoli o standards , where enacted , an d othe rprogram s t o encourag e th e developmen t o f renewabl e technologie s contnbut e t o th e growt h o f renewabl e generation
. Compare d wit h AE098, lowe rresourc e cost s i n th e AE099 projection s resul t i n mor e biomas s generation , an d highe rcapacit yfactors fo rhydroelectri c an d -geotherma l facilitie s lead-to highe rgeneratio n fro m thos e technologies
. Hydropower , currentl yth e larges t renewabl e resource use d fo rgeneration , decline s slightl ythroug h 2020
. It s growt h i s limite d b yhig h capita l costs , lac k

of availabl e ne

w sites , reduce d Federa l investment , an d declinin g publi c support . Generatio n from othe rrenewabl e sources —municipa l soli d waste , solar , an d wind—increase s t o level s simila rt o thos e i n AE098 i n 2020
. 

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### Annua l Energ y Outlook 1999 - Overvie

w Pag e 5 of 6
Productio n an d Imports U.S
. crud e oi l productio n decline s a t a n averag e rat e of 1. 1 percen t a yea r betwee n 1997 an d 202 0 to a projecte d leve l of 5. 0 millio n barrel s a day
. Advance s i n oi l exploratio n an d productio n technologie s d o not offse t declinin g resources . Projecte d oi l price s i n AE099 are simila rt o thos e i n AE098 i n 2020 , bu t ar e significantl ylowe rearlie ri n th e projectio n period
. Highe rdomesti c oi l reserves , as indicate d b

yrecen t data , offset th e impac t of lowe roi l prices
. Productio n i s simila rt o o rhighe rtha n that i n AE098 throug h most o f th e forecast
. I n 2020 , th e projecte d productio n i s essentiall yth e sam e a s i n AE098. Tota l petroleu m productio n (Figur e 5) i s shore d u p b

yproductio n of natura l gas plan t liquids , whic h partiall yoffsets th e declin e i n crud e oi l production
. Declinin g productio n an d rising deman d lead t o increasin g petroleu m imports throug h 202 0 (Figur

e 6)
. Th e shar

e of petroleu m consumptio n met b ynet imports rise s from 4 9 percen t i n 1997 to 6 5 percen t however , th e shar e i s highe rearlie ri n th e projectio n perio d becaus e of lowe rdomesti c production
. Figur e 5 . Energyproductio n b

yfuel
. 1970-202 0 (quadrillio n Btu ) rsources l Figur e 6
. Net energyimports b yfuel , 1970-202 0 (quadrillio n Btu ) [sources ] I n AE099, natura l ga s productio n i s projecte d t o increas e fro m 18. 9 trillio n cubi c fee t i n 1997 t o 27. 4 trillio n cubi c fee t i n 2020 , a n averag e rat e o f 1. 6 percen t a year , t o mee

t mos t of th e risin g domesti c deman d fo rnatura l gas . Additiona l supplie s of natura l ga s are provide d b yimports
. Net import s o f natura l gas , primaril yfrom Canada , increas e fro m 2. 8 t o 5. 0 trillio n cubi c fee t betwee n 199 7 an d 2020
. I t i s assume d that pipelin e capacit yfrom Canad a wil l increas e t o accommodate imports o f competitivel yprice d Canadia n gas . Coa l productio n grow

s fro m 1,09

9 millio n ton s i n 199 7 t o 1,358 millio n ton s i n 2020 , a n averag e increas e o f 0. 9 percen t a year , t o meet risin g domesti c an d expor t demand
. Mos

t stea m coa l exports serve market s forelectricity generatio n i n Europ e an d Asia
. Metallurgica l coa l export s t o Europ e an d Asi a decline
. Expor

t deman d i s lowe rtha n i n AE098 b y3 5 millio n ton s becaus e o f environmenta l concern s an d economi c problem s i n som e countries
. Becaus e lowe rexpor

t deman d i s onl ypartiall yoffset b yhighe rdomesti c demand , coa l productio n i n 202 0 i s 1 8 millio n ton s lowe rtha n th e AE098 projection
. Tota l renewabl e energ yproductio n i s projecte d t o increas e fro m 6. 8 t o 8. 2 quadrillio n Bt u betwee n 1997 an d 2020—a n averag e annua l increas e o f 0. 8 percent—wit h growt h i n electricit ygeneratio n fro m geothermal , biomass , an d municipa l soli d wast e generatio n an d i n industria l biomas s an d ethano l use . Renewabl e energyproductio n i n 202 0 i s 0. 4 quadrillio n Bt u highe rtha n i n AE098. Mor

e renewable s ar

e use d fo relectricit

ygeneration , cogeneration , an d ethano l blending , an d AE099 incorporate s ethano l productio n from cellulos e beginnin g i n 2001 , whic h wa s not include d i n AE098. Carbo n Emission s Carbo n emission s fro m energyus e are projecte d t o increas e b ya n averag e of 1. 3 percen t a yea rthroug h 2020 , from 1,48 0 millio n metri c ton s i n 199 7 t o 1,790 millio n metri c ton s i n 201 0 an d 1,97 5 millio n metri c ton s i n 202 0 (Figure 7) , du e t o risin g energydemand , declinin g nuclea rpower , an d slow growt h o f renewables
. Relativ

e t o th e 199 0 leve l of 1,34 6 millio n metri c tons , emission s are 3 3 an d 4 7 percen t higher , respectively , i n 201 0 an d 2020
. Projecte d emission s i n 202 0 are highe rb y1 9 millio n metri c ton s tha n i n AE098, du e t o -highe renerg ydeman d an d higher , levelsof-coakfire d electricitygeneration
. Figur e 7 . U.S
. carbo n emission s b ysecto ran d fuel
. 1990-202 0 (millio n metri c tons ) fsources ] 

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### Annua l Energ y Outloo k

199 9 - Overvie w Pag e 6 o f 6
Th e Climate Chang e Actio n Pla n (CCAP ) wa s develope d to stabiliz e greenhous e gas emission s i n 200 0 a t 199 0 levels
. AE099

include s CCA P provisions , bu t n o ne

w carbo n reductio n policie s are incorporated
. Carbo n emission s an d th e Kyot

o Protoco l ar

e discusse d i n "Issue s i n Focus. " Tabl e 1
. Summar

yof results fo rfive case s [sources ]

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e t o receive d anyinformatio n relatin g t o anyo f ou rreports vi a e-mail , clic k o n th e lin k

labele d "Projection s ListServ " t o Joi n b yenterin g you re-mai l address
.

Fil e las t modified : Ma

y3,199 9 URL : http://www.eia.doe.qov/oiaf/aeo99/overview.htm l

Nee d Hel p Now? Cal l th e Nationa l EnergyInformatio n Cente r(NEIC ) (202 ) 586-880 0 9A M - 5P M easter n tim e Specialize d Service s from NEI C I f yo u are havin g technica l problem s wit h thi s site , pleas e contac t th e EI A Webmaste rat wmaster@eia.doe.go v



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### Pag e 1 o f

1

8- 6- 4- 3- AE099 AE09S Average electricity (cents per kilowatthour) Crude oil (dollarsper

barrel) 1997 3- 30103030

AE09S "AE098 Natumlgas wellhead (dollars per

thousand cubic feet) 1997

35- 30- ( 15- 10- 5- 30103030

AE098 AE09S Coal minemouth (dollars per

short ton) 1997 3010 30301997 3010 3020



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### /-viuiua i energ y WUUUU

K 

### iyyy - issue s i n focu s Pag e 1 of2 4



# Issues i n Focu s Repor t Content s Th e Economi c Declin e i n Eas t Asi a [Report#:DOE/EIA-038 3 ' " " Recen t Development s

> Preface

•Administrator' s Messag e



### ' Overvie w

• Legislatio n & Regulation s

•Issues i n Focu s

' Marke t Trend s Althoug h thi s Annua l Energ yOutloo k 1999 (AE099 ) focuse s o n th e determinants of growt h fo rth e Unite d State s i n a midter m (20-year ) setting , i t i s als o importan t t o conside rho w near-ter m events ma

ypla you t ove rth e lon g run . Th e recen t economi c crisi s i n Eas t Asi a illustrate s th e nee d t o reconcil e volatilit yi n th e shor

t ru n wit h th e long-ru n determinants of growt h fo rth e worl d an d th e U.S
. economy . Th e economi c crisi s i n Eas t Asi a bega n i n th e summe ro f 199 7 an d continue d t o deepe n throughou t 1998
. Currenc ymarkets i n Southeas t Asi a becam e extremel yvolatile , wit h Thailand , Malaysia , an d Indonesi a experiencin g sharp depreciation s first , followe d b yth e Philippine s an d Sout h Korea
. Betwee n th e en d of Ma y1997 an d Septembe r1998 , th e U.S
. dolla rros e b y6 7 percen t against th e Tha i baht , nearl y5 3 percen t against th e Malaysia n ringgit , an d mor e tha n 6 1 percen t against th e Sout h Korea n won . Fo rmost o f th e Eas t Asia n countries , however , th e exchang e rat e fluctuation s occurre d betwee n August 199 7 an d th e en d of Marc h 1998 , wit h currenc yvalue s relativel ystabl e durin g th e summe ro f 199 8 (althoug h at muc h highe rlevel s agains t th e dolla rtha n i n Januar y1997)
. Indonesia' s currenc ydi d continu e t o show volatility , a s th e countr ytrie d t o accommodate increase d financin g need s fo rbot h economi c investmen t an d socia l costs .

' Forecas

t Comparison s

" Majo r Assumption s fo r th e Forecasts

" Mode l Results (Appendi x Tables )

" Download Repor

t

" Acronym s

•Contacts

" Feedbac k

n _i_.i-.

_J

i i_i. _ Th e Asia n economie s affecte d b yth e crisi s shar

e man ycharacteristics : relativel yrapi d economi c growt h ove rth e pas t 3 t o 6 years ; hig h domesti c saving s rates ; economi c expansio n sustaine d b yexport s rathe rtha n domesti c deman d growth ; hig h curren t accoun t deficits ; hig h inflows o f foreig n capita l befor e th e currencie s becam e volatile ; an d relativel yla xfinancia l regulations
. Earl yi n 199 7 thei rcurrencie s were pegge d t o th e U.S
. dollar , an d theybecam e overvalue d whe n th e countrie s experience d larg e curren t accoun t trad e deficits
. I n addition , credi t wa s allocate d i n thei rfinancia l sectors o n non-busines s criteria , an d excessive investments were mad e i n rea l estate , leadin g t o inefficien t use s o f th e availabl e capital
. Whe n th e exchang e rate s ros e loan s coul d not b e repaid , foreig n portfoli o capita l fled , an d Asia n firm s foun d i t difficul t t o finance neede d imports of essentia l intermediat e products
. Curren t events have expose d significan t vulnerabilitie s i n Asia n an d othe r developin g economies , raisin g question s abou t th e timin g an d exten t of short an d long-ter m recovery . Developin g economie s nee d t o devot e muc h o f thei r economi c resource s t o improvin g infrastructur e (education , transportation , an d communicatio n a s wel l a s energ yresources ) an d ten d t o rel yo n internationa l capita l flow s t o financ e muc h o f thei rinvestment
. Bu t internationa l capita l flows , especiall yportfoli o investment , are volatil e an d ma yhave substantia l impact s o n short-ter m growth
. Whethe rlong-ru n growt h i s als o affecte d depend s o n th e reason s fo rth e financia l instability , th e underlyin g economi c characteristics of th e countr

y(suc h a s th e skil l o f th e labo rforce) , th e domesti c saving s rate , th e prospect s fortrade d good s i n globa l competition , an d th e infrastructure that support s th e economy . I n Thailand , Indonesia , an d Sout h Korea , th e Internationa l Monetar yFun d (IMF )



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### Annual energ y outloo k

lyy y - Issue s i n hocu s Pag e 2 of2 4 ftt?!3Le{J L1.IK S

" Assumption s t o th e AE09 9

" Interactiv e Dat a Querie s t o th e AE09 9

' Supplementa l Dat a t o th e AE09 9

' NEM S Conferenc e

' T o Forecastin g Hom e Pag e

• EI A Homepag e ha s agree d t o suppl ycapita l i n exchang e fo ragreemen t t o a se t of fisca l an d monetar ypolicie s designe d to reduc e volatilit yi n financia l markets
. Th e policie s ar e aime d a t decreasin g governmen t expenditures , removin g som e governmen t control s ove rth e financia l sector , allowin g insolven t financia l institution s an d businesse s to fail , an d allowin g mor e foreig n ownershi p t o encourag e foreig n direc t investment
. Th e short-ru n impact s o f suc h policie s are likel yt o b e highe r inflation , lowe rimports , an d reduction s i n sector s o f th e econom ythat ar

e sensitiv e t o interest rate s (suc h a s constructio n an d investment)
. On e resul t i s projecte d lowe reconomi c growt h fo rth e nex t severa l years . Th e Asia n recessio n i s provin g to be mor e sever e tha n anticipate d last yea r whe n AE09 8 was bein g prepared
. A t tha t time , mos

t analyst s though t that th e Asia n crisi s woul d follow th e cours e o f th e Mexica n crisi s o f 1994 , whe n th e Mexica n econom ysa

w a severe dro p i n GD P growt h i n 199 5 (6. 2 percent) , followe d b ypositive growt h (5. 2 percent) i n 1996
. A numbe rof factor

s hav e contribute d t o a deepe rrecessio n i n Asi a tha n originall yexpected
. First , wit h impor t deman d plungin g i n man yAsia n countries , intraregiona l trade , whic h fuele d growt h i n th e earl y1990s , ha s collapsed
. Th e Japanes e economy

—wea k a t th e beginnin g of th e Asia n crisis—ha s no t ye t recovered
. I n contrast , durin g Mexico' s rapid economi c recover yafte rit s 1994 currenc ycrisis , it s mai n tradin g partner , th e Unite d States , wa s experiencin g stron g economi c growth
. Second , hig h interest rate s an d wea k currencie s hav

e mad e i t difficul t fo rAsia n countrie s t o obtai n financin g fo ressentia l intermediat e inputs
. Withou t th e necessar yinputs , manyexpor

t product s cannot b e produced
. Finally , wit h th e collaps e of manyAsia n countrie s an d th e absence of a Japanes e recovery , worl d expor t deman d has no

t bee n sufficien t t o offse t th e dro p i n intra-Asia n trade
. Domesti c deman d i n th e Asia n countrie s mus t recove r befor e th e intraregiona l trad e ca n resum e its impetu s fo rgrowth
. Hig h interest rates , prescribe d b yth e IMF , were expecte d t o cu t wastefu l spendin g whil e attractin g mor e capita l t o th e Eas

t Asi a region
. I n fact , however , investor s hav e bee n unwillin g t o channe l thei rmone yt o countrie s wher

e there i s a risk of furthe rcurrenc

ydevaluations
. Tighte rcredi t ha s substantiall y reduce d domesti c deman d i n th e affecte d countries , bu t th e region' s exchang e rate s ar e stil l volatile
. Whethe rth e shar p currenc ydevaluation s i n Eas

t Asi a wil l lea d t o lowe rgrowt h rate s ove rth e nex

t 2 5 years wil l depen d i n larg e par t o n th e policie s enacte d i n respons e t o short-ru n developments
. I f th e financia l reform s enacte d mak e financia l transaction s mor e transparent , the n market condition s wil l judg e th e efficac yof ne w investments
. Makin g investmen t decision s mor e market-drive n coul d lead t o potentiall yhighe rlong-ru n economi c growth , especiall ygive n th e relativel yhig h educatio n level s an d saving s rate s o f th e labo rforce
. Impact s o n th e Worl d Oi l Marke t Ove rth e past 2 years , crud e oi l price s have droppe d b ymore tha n 4 0 percent , reflectin g a significan t worl d oi l surplus
. Abundan t suppl yan d wea k worldwid e demand , especiall yamon g th e strugglin g economie s o f th e Pacifi c Rim , have combine d t o produce th e lowes t worl d oi l price s sinc e th e earl y1970s
. Th e timin g an d magnitud e o f a n expecte d reboun d i n deman d foroi l an d i n worl d oi l price s are th e sourc e o f muc h uncertaint yi n AE099
. Th e referenc e cas e forecas t assume s that rea l price s fo roi l ris e at a n annua l rate o f almost 6 percen t from 199 9 t o 2007
. Afte r2007 , th e referenc e cas e oi l price s are simila r t o thos e i n th e Annua l EnergyOutloo k 199 8 (AE098) , risin g at a n annua l rat e of les s tha n 1 percen t (Figur e 8)
. Development

s that coul d contribut e t o delayin g th e retur n unti l 2007 , a s oppose d t o a mor e rapi d rebound , includ e th e following
. Figur e 8
. Worl d oi l pric e projection s i n th e AE09 8 an d AEQ9 9 referenc e cases , 

### 1990-202 0 (199 7 dollar

s pe rbarrel ) fsources ] 

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### Annual Energ y Outloo k

199 9 - Issue s i n Focu s Pag e 3 o f 2 4
Th e Organizatio n of Petroleu m Exportin g Countrie s (OPEC ) has agree d o n productio n cutback

s of abou t 2. 6 millio n barrel s a da yi n 1998 t o counte rth e slow growt h i n worl d oi l deman d an d th e dro p i n oi l prices
. Ther e i s muc h skepticism , however , a

s t o whethe rmembe rnation s wil l strictl yadher e to suc h quotas . Prio rexcursion s into quota-settin g hav e resulte d i n temporar

yimpacts o n worl d oi l prices , bu t cutback s hav e bee n difficul t t o maintai n an d verif yove r th e lon g term . Man

yOPE C countrie s are almos t totall ydependen t o n oi l expor t revenue s fo rthei rnationa l income , an d productio n cutback s ar e especiall y painful
. A n additiona l facto rof critica l importanc e t o OPE C suppl ypotentia l i s th e reemergenc

e of Iraq as a n oi l exporter . Th e Unite d Nation s Securit yCounci l has agree d t o allo

w Iraq t o expor

t oi l (fo rhumanitaria n reasons ) a t a rat e of 1. 6 millio n barrel s a day
. Whe n Iraq i expor t sanction s are eventuall ylifte d (assume d t o b e afte r200 0 i n th e reference case) , Ira q coul d easil yexpan d its productio n capacit

yt o mor e tha n 3 millio n barrel s a da yb y2005
. I n addition , severa l non-Persia n Gul f OPE C member s (Algeria , Nigeria , an d Venezuela ) have active plan s t o expan d thei rproductio n capacitie s ove rth e nex t half-doze n years . Non-OPE C productio n potentia l continue s t o gro w despit e th e lo

w pric e environment
. Nort h Sea productio n i s expecte d t o pea k b yth e middl e of th e nex t decad e a

t level s that are at least 1 millio n barrel s a da ygreate rtha n curren t output . Othe rcountrie s withi n th e Organizatio n fo rEconomi c Cooperatio n an d Developmen t (OECD ) that ar e expecte d t o registe rproductio n increase s withi n th e nex

t decad e includ e Australia , Canada , an d Mexico
. I n Lati n America , Argentina , Brazil , an d Colombi a ar e showin g accelerate d growt h i n oi l productio n du e i n par t t o privatizatio n efforts
. Deepwate rprojects of f th e coast o f wester n Afric a an d i n th e Sout h Chin a Se a are no t expecte d t o b e delaye d an d wil l star

t producin g significan t volume s earl yi n th e nex t century . Becaus e subse a oi l platform s hav e t o b e schedule d s o fa ri n advance , mos t of th e worldwid e deepwate rproject s are proceedin g o n schedul e eve n a t today' s prices
. Th e blea k

economi c outloo k

fo rsevera l Southeas

t Asia n economie s has significantl ydampene d th e growt h i n oi l deman d forth e region , whic h i n recen t year s ha s accounte d fo rabou t one-hal f of th e growt h i n Asia' s oi l demand
. I n 199 8 deman d i s expecte d t o decline , an d th e timin g o f it s recover yhas becom e increasingl yuncertain
. Othe rregion s whos e near-ter m GD P growt h i s les s optimisti c tha n tha

t assume d i n AE09 8 includ e China , th e Forme rSoviet Union , an d Japan
. Eve n wit h lowe roi l prices , near-ter m oi l deman d i s expecte d t o increas e at onl yabou t hal f th e rate o f th e pas t 5 years (Figur

e 9)
. Figur e 9
. Oi l deman d projection s fo rdevelopin g Asi a i n AEQ9 8 an d AEQ99
. 

### 1990-2020 (millio n barrel s pe rday) fsources ] Impacts o n th e Deman d fo r U.S . Exports I n th e nea rterm , expor

t deman d forU.S
. good s an d service s wil l suffe ras worl d activit yslows i n respons e t o thes e near-ter m volatil e event s (Figur e 10)
. Afte r expansive growt h from 199 5 throug h 1997 , averagin g ove r1 1 percen t a year , th e growt h i n deman d fo rU.S
. export s slowe d t o les s tha n 1 percen t i n 1998 an d i s expecte d t o averag e les s tha n 4 percen t fro m 199 8 throug h 2000
. Expor t deman d i s expecte d t o reboun d b yth e yea r200 0 an d sustai n a growt h rate of 8 percen t a yea rfro m 200 1 throug h 2003
. Figur e 10
. Projecte d annua l growt h i n rea l U.S
. exports . 1995-200 3 (percent ) [sources ] Becaus e onl ya relativel ysmal l portio n o f U.S
. export s goe s t o thos e countrie s where curren t economi c disruption s are greatest , curren t Asia n event s ar e not expecte d t o hav

e a s lastin g a n effec

t o n th e U.S
. econom ya s o n th e worl d oi l market
. Nonetheless , compare d wit h AE098, slowe rgrowt h i n export s i s expecte d fro m 199

7 throug h 201 0 i n th e AE099 referenc e case . Th e expecte d reductio n i n expor

t deman d i s expecte d t o reduce rea l GD P growt h b ya s muc h 

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### annua l energ y UUUOO K



### iyy y - issue s i

n hocu s Pag e 4 o f 2 4
as a tent h of a percentag e point
. Th e relativel ylowe rgrowt h i n export s i n th e firs t 1 0 year

s o f th e forecast results i n slowe rgrowt h i n domesti c U.S
. manufacturin g relative t o last year' s expectations
. Manufacture d good s are affecte d mor

e b yexpor t an d impor

t trend s i n th e economytha n ar e eithe r service s o rwholesal e an d retai l trade
. As exports recover , s o doe s th e growt h rate of manufacture d output . Respondin g t o Growt h i n Deman d fo rNatura l Gas I n th e AE099

reference cas e projections , natura l ga s consumptio n i n 202 0 i s nearl y50 percen t highe rtha n th e 1997 leve l of 22. 0 trillio n cubi c feet
. I n orde rt o satisf yth e deman d projecte d fo r2020 , a numbe ro f change s wil l b e neede d i n th e U.S
. natura l gas industry , includin g a significan t increas e i n productio n an d considerabl e expansio n of infrastructure
. Onshor e an d offshor

e productio n ar

e projecte d t o increas e b

y5 7 an d 1 4 percent , respectively , an d pipelin e capacit y t o increas e b

y3 2 percen t ove r1997 levels
. Althoug h today' s market differs fro m th e market

s tha t existe d i n pas

t period s of significan t growth , increase s wel l abov e thos e projecte d i n AE099 hav e bee n realize d i n th e pas t an d th e industry' s pas

t performance give s reaso n fo rconfidence that th e projecte d increase s ca n b e accommodated
. Interregiona l pipelin e capacit yincrease d b

y6. 9 trillio n cubi c fee t (2 1 percent ) ove rth e 7-yea rperio d fro m 199 0 (th e firs t yea rEI A bega n compilin g capacit y data ) t o 1997
. Th e drivin g forc e behin d th e expansio n wa s no t t o meet a n overal l increas e i n deman d perse —the 199 7 market o f 22. 0 trillio n cubi c fee t i s roughl yequivalen t i n siz e t o th e 197 2 historica l pea k

of 22. 1 trillio n cubi c feet

— bu t instead t o provid e ne

w acces s corridor

s as suppl yan d deman d centers shifte d i n a changin g market
. Similarly , th e nee d fo radditiona l pipelin e capacit y projecte d i n AE099

primaril yreflect s th e deman d fo rgreate rcustome racces s t o ne w an d expandin g suppl ysource s an d fo rsupplementa l capacit yint o area s o f growin g deman d wher

e pea k perio d utilizatio n i s approachin g maximu m availabl e capacity
. As a n example , propose d additiona l capacit yfrom Canad a wil l brin g significantl ygreate rvolume s o f ga s t o th e midweste m marketplace
. A t th e sam e time , severa l existin g pipeline s alread yhav e th e capacit

yt o mov e larg e volume s of ga

s fro m th e Sout h Centra l regio n t o th e sam e area . A s capacit y expansio n project s procee d ove rth e nex t severa l years , ther e i s a stron g potentia l fo rsurplu s suppl yt o develo p i n th e Chicag o area . As a result , pipeline s exitin g th e Sout h Centra l regio n that compete wit h Canadia n ga s coul d becom e underutilized
. To alleviat e th e situation , an d t o addres s th e growin g deman d fo rnatura l ga s i n th e Northeast , a numbe ro f project s hav e bee n propose d that woul d ta p int o th e expandin g Chicag o hu b an d redirec t som e o f it s supplie s eastward
. Muc h o f th e ne

w capacit ythat ha s bee n adde d since 199 0 o ri s t o b e complete d b y200 0 consist s o f long-hau l pipeline s from growin g suppl yareas . B y2000 , muc h o f th e projecte d ne

w capacit ywil l b e abl e t o lin k

wit h nearb

ymajo rlong hau l pipeline s alread yi n operation , s o tha t th e primar yshort-ter m requirement s wil l b e fo rfeede rline s t o ta p into th e existin g pipeline s o rcompressio n an d loopin g alon g existin g route s wher e capacit yneed s t o b e augmented
. Compressio n an d loopin g are muc h les s expensive tha n layin g pip e alon g ne w route s an d usuall yrequire les s lea d time
. Muc h o f th e expansio n projecte d i n AE099 befor e 200 1 alread yi s eithe runde r constructio n o rplanned , an d mor e tha n hal f th e pipelin e expansio n expecte d b y 202 0 i s likel yt o occu rbetwee n no w an d 2000
. A numbe ro f projects have bee n propose d (althoug h not al l o f the m wil l actuall yb e built) , an d substantia l investmen t ha

s bee n mad e i n pipelin e expansion
. Th e adde d capacit ywil l provid e acces s t o ne

w an d expandin g productio n areas , suc h a s Canad a an d th e dee p offshore , an d wil l accommodat e shift s i n deman d patterns , suc h as ne w deman d fo rnatura l ga s t o replace electricit ygeneratio n capacit

ylos t a s a resul t o f nuclea rretirements
. 

### Governmen

t polic y support s a

n optimistic outloo

k fo r th e post-200 0 pipeline http://www.eia.doe.gov/oiafaeo99/issues.htm l 1/2/0 1 

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### Annua l Energy Outlook

1999 - Issue s i

n Focu s Pag e 5 of 2 4 expansio n forecast
. FER

C polic yallow s th e pipeline s t o assum e mor e ris k rathe rtha n requirin g fir m contract s t o be i n place befor e approvin g a n expansion , an d th e Counci l o n Environmenta l Qualit yha s recentl yallocate d fundin g t o promote interagenc

ycooperatio n i n th e review of pipelin e permits , wit h th e primar

yintentio n of speedin g u p th e process . Th e FER C ha s responde d positivel yt o issue s raise d b yth e pipelin e industr

yregardin g it s metho d of determinin g allowe d rate s o f retur n b yevaluatin g possibl e change s i n th e method i t use s to calculat e returns . Pipeline s hav e claime d that the

yface considerabl e ris k

becaus e of increase d competitio n an d th e threat of capacit y turnback , an d that th e 12 - t o 13-percen t averag e rat e o f retur n fo rpipeline s i n 199 6 was fa rlowe rtha n th e 20-percen t rate earne d b ymos t publi c companie s [17]. Anothe rissu e that th e industr ywil l face i n meetin g th e productio n forecast i s suppl yavailability
. Uncertaint yi n estimate s of th e Nation' s natura l gas resources , bot h onshor

e an d offshore , ha

s alway s bee n a n issu e i n projectin g productio n [18\. Despite th e fac t tha t offshor

e productio n level s i n th e AE099 forecas t d o no

t excee d curren t level s unti l 2003^ - suggestin g tha t offshor e productio n wil l no

t b e a problem—ther

e ar e a numbe rof potentia l problem s relate d t o th e recover

yof natura l ga s fro m offshore areas . On e issu e i s a potentia l shortag e o f offshor e rigs an d skille d personnel
. Althoug h th e short-ter m situatio n has change d wit h th e recen t downtur n i n oi l prices , ever

yavailabl e offshore ri g was i n us e throughou t 1997 , an d th e constructio n o f ne

w rig s has bee n limite d b

yuncertaint

ysurroundin g thei r deman d fo rth e longe rterm . Th e lea d time fo rconstructio n o f new rig s i s 2 t o 3 years , an d cost s rang e fro m $11 5 millio n fo ra 350-foot jac k u p t o $32 5 millio n fo ra deepwate rsemisubmersibl e [19\. Trainin g i s neede d t o develo p a wor k forc e fo roffshor

e production , an d becaus e of it s cyclica l histor ymanypeopl e are reluctan t t o ente rthi s wor k force
. A n additiona l issu e i s th e nee d fo rinfrastructur e expansion
. Infrastructure t o mov e natura l gas fro m offshore drillin g platform s t o th e shor e wil l nee d t o expan d a s productio n grows , an d gatherin g system s fo roffshore production , th e cost s o f whic h are not know n wit h certainty , nee d t o b e developed
. Despit e th e problem s thes e issue s ma ypresent , however , continuin g developments i n offshore technolog yhav

e improve d th e prospects fo roffshore ga s production
. Althoug h there hav

e bee n som e spendin g cutback s a s a resul t o f curren t lo w oi l prices , investments ar

e bein g mad e i n al l thes e areas , an d technolog y advance s ar

e cuttin g lea d times an d improvin g th e economics o f smalle rfields
. Becaus e of expecte d growt h i n natura l gas demand , severa l studie s ar e bein g undertake n t o asses s wha t step s th e natura l ga s industr yneed s t o tak

e t o b e abl e t o respond
. Forme rSecretar yof EnergyFederico Pefta commissione d th e Nationa l Petroleu m Counci l (NPC ) t o undertak e a stud yo f what i s neede d fo rth e industr

yt o b e abl e t o respon d t o deman d increases
. I n addition , th e Natura l Ga

s Suppl yAssociatio n (NGSA ) i s workin g o n a repor

t tha t wil l analyz e whethe rth e industr

yca n meet increase d deman d projection s withou t increasin g wellhea d prices , an d th e Interstat e Natura l Gas Associatio n o f America (INGAA ) i s workin g o n a stud yt o determin e what need s t o b e don e forth e pipelin e industr

yt o meet th e need s o f a market o f 3 0 trillio n cubi c fee t b y201 0 ( 2 trillio n cubi c fee t above th e AE099 forecast). Th e ke

yuncertaintie s i n satisfyin g a market of that siz e are wher e th e deman d wil l occu ran d whethe r there i s enoug h pipelin e capacit yt o mov e th e ga s int o growin g deman d centers . Th e INGA

A stud yaddresse s th e questio n o f whethe rth e pipelin e industr yca n provid e th e expande d infrastructure neede d t o ge t th e ga s t o market
. On e o f th e problem s wit h rapi d expansion s i s th e lead time necessar yfo ra pipelin e project
. Barrin g unforesee n delays , capacit yexpansio n require s a lea d tim e o f 2. 5 t o 3 years . I f a n environmenta l impac t statemen t i s required , i t ca n ad d anothe r3 month s t o th e completio n tim e \20\. Th e pipelin e capacit

yexpansio n currentl yunderwa yreflect s th e industry' s anticipatio n o f a n expandin g marke t Positiv e step s are als o bein g take n i n othe rparts of th e industry
. Again , despit e recen t cutback s resultin g fro m lo

w oi l prices , investments stil l are bein g mad e i n exploratio n an d production , an d they 

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### Annual Energ y Outloo k

199 9 - Issue s in Focu s Pag e 6 o f 2 4
are expecte d t o continue , largel yindependen t of lowe roi l prices , a s highe rga s price s provid e a positive incentiv e fo rinvestment
. I n fact , spendin g o n natura l ga s projects increase d i n th e firs t quarte rof 1998 an d was unchange d i n th e secon d quarte r\21}. Th e risin g level s o

f deman d an d price s fo rnatura l gas projecte d i n AE099 wil l provid e additiona l economi c incentive s fo rth e investments i n infrastructure , rigs , drilling , an d manpowe rdevelopmen t neede d t o meet th e necessar y increase s i n ga

s production
. As a result , i t i s expecte d that th e natura l ga s industr ywil l be i n a positio n t o mee t th e challeng e o f satisfyin g th e deman d increase s projected
. Renewabl e Portfoli o Standard s Federa l legislatio n propose d b ySenato rJeffords , Senato rBumpers , an d Congressma n Schaefe rinclud e renewabl e portfoli o standar d (RPS ) provision s that ar e simila rt o thos e include d i n Stat e restructurin g plans
. Each of th e Federa l bill s propose s a renewabl e credi t syste m a s describe d i n "Legislatio n an d Regulations"
. Th e ke ydifference s i n th e respective RPS'provision s are th e require d renewabl e shar

e an d th e renewabl e technologie s that woul d receive credits
. Th e shar

e require d b

y202 0 varie s fro m 4 percen t i n H.R
. 65 5 (Schaefer ) t o 2 0 percen t i n S
. 68 7 (Jeffords)
. Eac h o f th e bill s allow s al l nonhydroelectri c renewabl e resource s t o receive credits
. S ! 23 7 (Bumpers ) als o provide s partia l credit s t o larg e hydroelectri c facilities , greate rtha n 8 0 megawatts . I n Marc h 1998 , th e Clinto n Administratio n release d it s Comprehensiv e Electricit yCompetitio n Pla n [221 an d ' n Jun e 1998 th e Secretar yof Energy submitte d th e Administration' s propose d legislatio n t o implemen t th e plan
. Sectio n 30 2 o

f th e propose d Comprehensive Electricit yCompetitio n Act [23 1 call s forth e establishmen t o f a Federa l RPS
. Beginnin g i n 2000 , eac h retai l electricit ysupplie rwoul d b e require d t o submi t t o th e Secretar yof Energ y renewabl e energ ycredit s i n a n amoun t equa l t o th e require d percentage . Credit s woul d b e earne d fo reac h kilowatthou rgenerate d fro m solar , wind , geothermal , o rbiomas s plants
. Th e propose d percentag e reache s 5. 5 percen t i n 201 0 an d remain s ther

e throug h 2015
. Betwee n 200 0 an d 201 0 th e require d percentag e i s t o b e determine d b yth e Secretar

yof Energy , bu t i t woul d b e les s tha n 5. 5 percent . Th e followin g analysi s illustrate s th e potentia l effects o f th e propose d RPS
. Fo rpurpose s o f th e analysis , i t i s assume d tha t th e require d shar e woul d gro

w linearl yfro m 0 t o 5. 5 percen t betwee n 200 0 an d 201 0 an d remai n a t 5. 5 percen t throug h 2015 , a t whic h tim e th e requiremen t woul d b e eliminate d [24\. Th e RP S woul d hav

e a n impac

t o n th e types of plant s buil t t o mee t th e growin g deman d fo relectricity
. Ne w win d an d biomas s plants , an d geotherma l t o a lesse rexten t ar

e expecte d t o mak

e ke ycontribution s i n meetin g th e RP S (Figur e 11)
. I n th e reference case , onl y9 gigawatts o f ne w renewabl e plant s are expecte d t p b e built , becaus e i n most situation s theyare no t competitive wit h fossi l alternatives
. Unde rth e propose d Federa l RPS , however , renewabl e technologie s woul d pla

ya large rrole
. I n th e Federa l RP S sensitivit ycase , mor

e ne w win d plants are expecte d t o b e buil t i n som e region s of th e country , particularl yi n th e Northwest , Southwest , an d Uppe rMidwes t Figur e 11
. Renewabl e electricit ygeneratio n i n two cases , 202 0 (billio n kilowatthours ) [sources ] Th e Unite d State s has vas t win d resource s i n som e areas , bu t manyare i n region s o f lo

w demand , an d ther

e i s som e uncertaint

yabou t th e cost s o f developin g the m an d deliverin g thei rpower . Fo rexample , som e o f th e best win d resource s ar

e locate d fa rfrom transmissio n line s an d load centers , i n environmentall ysensitive areas , o ro n terrai n that i t i s not suitabl e fo r economica l construction
. I n term s o f biomass , there are significan t supplie s o f relativel ylow-cos t biomas s that , fo rth e most part , are not currentl ybein g use d fo renergyproduction
. Th e 

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### Annua l Energy Outlook

199 9 - Issue s i

n Focu s Pag e 7 o f 2 4 lo w cos t o f fossi l fuels , particularl ycoal , makes the m unattractive
. Fo rexample , ther e ar e larg e amount

s of urba n woo d waste , tre e trimmings , constructio n an d demolitio n debris , an d discard s suc h a s crate s an d pallet s tha t coul d be burne d t o produc e energy , rathe rtha n dispose d o f i n landfills
. Thes e material s ca n b e burne d i n standalon e facilities , bu t a les s expensive alternative ma ybe t o us e the m as a secondar

yfue l i n existin g coal-fire d plants
. Man yexistin g coa l plants ma yb e abl e to consum e u p t o 5 percen t o f thei rtota l fue l inpu t as biomas s wit h relativel ymino rmodifications , an d eve n highe rlevel s ar e possibl e wit h mor

e significan t modifications
. I n thi s analysis , coal-fire d plants are permitte d to mee t u p t o 5 percen t of thei rfue l need s wit h biomas s i f i t i s economical ; however , us e o f th e biomass optio n i s limite d b yth e projecte d lo

w cos t of coal
. Althoug h th e require d shar e fo rrenewable s i s relativel ylow i n th e Federa l RP S sensitivit ycase , i t woul d nevertheles s hav e a n impac

t o n electricit

yprice s (Figur e 12) , whic h ar

e projecte d t o b e almos

t 2 percen t highe ri n 201 0 an d 201 5 tha n the yar e i n Figur e 12
. Chang e i n averag e U.S
. electricit yprice s i n th e Federa l RP S sensitivit ycas e fro m th e reference case . 2000-202 0 (percent ) [sources ] th e reference case . Th e impac t i s les s i n th e late ryear

s becaus e renewabl e technologie s ar

e expecte d t o becom e mor e economica l ove rtime , wit h cost s declinin g onc

e theybegi n t o penetrat e th e market
. Th e pric e impac t almost disappear s i n 2020 , whe n th e RP S ha s ended
. Th e projecte d pric e difference s are relativel ysmall , bu t the yd o amoun t t o a n adde d cost t o consumers . Th e annua l impac

t varie s betwee n $1. 4 billio n an d $3. 7 billio n a yea rbetwee n 200 5 an d 2015 , wit h th e averag e residentia l electricit ybil l projecte d t o b e abou t $ 1 a mont h highe rtha n i n th e reference cas e i n 201 0 (Figur e 13)
. Afte r201 5 th e impac t decline s sharply
. Figur e 13
. Variatio n fro m reference cas e nationa l electricit ycost s i n th e Federa l RP S sensitivit

ycase , 2005-202 0 (billio n 1997 dollars ) [sources ] Th e impositio n o f th e RP S woul d hav e a positive effec

t i n reducin g emissions
. Becaus e th e ne

w renewabl e facilitie s buil t t o compl ywit h th e RP S woul d displac e outpu t fro m fossil plants , tota l emission s woul d b e lower
. Fo rexample , th e 5. 5 percen t RP S reduce s electricit ysecto rcarbo n emission s b y approximatel y2 3 millio n metri c ton s a yea rbetwee n 201 0 an d 202 0 (Figur e 14)
. Emission s of nitroge n oxide s (NO x) an d sulfu rdioxid e (S0 2 ) are not significantl y reduced , becaus e thei rlevel s are explicitl ycapped , an d implementing ; th e RP S woul d no t lea d t o furthe rreductions
. Th e impositio n o f th e RP S i s projecte d t o reduce slightl yth e incrementa l cos t of meetin g th e NO xan d S0 2 caps . Figur e 14
. Projecte d U.S
. electricity-relate d carbo n emission s i n tw o cases . 

### 1996-202 0 (millio n metri c tons ) fsources ] Electricit y Pricin g i n a Competitiv e Environmen t Electricit ymarkets i n manypart s of th e Unite d State s are bein g restructure d t o increas e competition
. Competitive pressure s ar e affectin g th e operation s of electricit ygenerators , eve n i n area s where n o forma l restructurin g legislatio n ha s bee n introduced
. Fo rexample , operatin g an d maintenance cost s for existin g powe rplants hav e bee n fallin g i n recen t years , an d furthe rreduction s are anticipated
. T o reflec

t thi s trend , th e AE099

referenc e cas e assume s a 25 - percen t reductio n i n curren t nonfue l operatin g cost s i n al l region s ove rth e nex t 1 0 years . Capita l cost s an d operatin g efficiencie s fo rne w plant s are als o assume d t o improv

e ove rtim e i n al l regions
. Futur e investmen t decision s ma yals o b e affecte d b

yincreasin g competition
. Accordingly , th e AE099

referenc e cas e assume s highe rcost s o f capita l an d shorte rrecover

yperiods
. Thus , th e reference cas e forecas t incorporate s man y o f th e expecte d effect s o f industr yrestructurin g i n al l regions , includin g thos e where competitive pricin g legislatio n o rothe rbindin g rule s have not bee n 

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### Annua l Energy Outlook

1999 - Issue s i

n Focu s Page 8 of 2 4 passed
. Historically , price s hav

e bee n set administrativel yas th e averag e embedde d cost s o f producin g electricity , includin g al l fue l an d operatin g an d maintenanc e costs , a s wel l as recover

yo f constructio n cost s an d a regulate d profit
. I n a competitive market , generatio n price s wil l var yove rtim e (eve n hou rt o hour) , an d wil l b e se t i n eac h tim e perio d b yth e operatin g cost s of th e mos t expensiv

e plan t neede d t o mee

t deman d a

t tha t poin t i n time—th e "margina l cost " o f production
. Th e margina l cost typically include s th e fue l an d variabl e operatin g an d maintenanc

e costs fo rth e generator . Durin g period s of hig h deman d i n a competitive market , whe n th e deman d fo r electricit yapproache s th e availabl e generatin g capacity , price s migh t rise ove r th e operatin g cost s o

f th e mos t expensive generato roperating
. Suc h occasiona l price spike s ca n encourag e consumer s t o reduce thei rusag e s o that suppl y an d deman d ar

e kept i n balance
. Similarly , price s consistentl yove rth e margina l operatin g cost s wil l provid e incentive s fo rth e constructio n o f ne w generatin g capacity
. I n AE099, a ful l competitiv e pricin g sensitivit

ycas e assume s that competitive pricin g wil l b e phase d i n throughou t th e Unite d State s ove r1 0 years , wit h ful l competitive pricin g base d entirel yo n margina l cost s occurrin g b y2008
. Currently , margina l operatin g costs are generall ylowe rtha n averag e embedde d costs , whic h includ e th e recover yof constructio n cost s o n plants that ar e no t competitive i n today' s market
. Wit h a gradua l shif t t o ful l competitive pricing , i t i s assume d that a portio n of suc h cost s wil l b e recovere d i n th e competitive price
. Whe n th e uneconomica l generator s have eithe rbee n pai d fo ro rretired , averag e cost s ar

e expecte d t o approach , an d possibl yfal l below , margina l costs . I n th e earl yyear

s o f th e forecast , coal-fire d unit s are projecte d t o b e use d mos t ofte n t o se t th e margina l cos t (Figur e 15)
. I n th e late ryears , as deman d increase s an d mos

t ne w capacit yi s gas-fired , th e projecte d margina l uni t i s mor e ofte n a combined-cycl e o rturbin e unit , an d th e margina l cost s ar e dependen t o n gas prices
. As a result , b y2020 , margina l cost s are projecte d t o b e slightl yhighe rtha n averag e costs . Figur e 15
. Percentag e of tim e that differen t plan t type s se t nationa l margina l electricit yprices , 2000.2010
. an d 202 0 (percen t o f total ) [sources ] I t i s wort h notin g that th e areas wit h th e highest electricit yprice s unde r regulatio n (Ne

w York , Ne

w England , an d California ) were amon g th e firs t t o pas s legislatio n allowin g competitio n betwee n electricit ysuppliers
. Becaus e th e AE099 reference cas e assume s margina l cos t pricin g fo relectricit ygeneratio n i n thos e region s that hav

e enacte d restructurin g legislation , th e region s that woul d expec

t th e largest price decline s a s a resul t o f competitive pricin g are assume d t o hav

e competitive electricit

yprice s i n bot h th e reference an d ful l competitive pricin g cases . (Th e referenc e cas e assume s a transitio n t o competitive pricin g i n California , Ne w York , th e Ne

w Englan d States , th e Mid Atlanti c States , an d th e Mid-Americ a Interconnecte d Network—Illinoi s an d parts of Wisconsi n an d Missouri. ) A s a result , th e projecte d difference s i n nationa l averag e electricit

yprice s betwee n th e tw o case s are relativel ymodest , rangin g from 5 percen t lowe ri n 2005 t o 4 percen t highe ri n 202 0 i n th e ful l competitive pricin g cas e tha n i n th e reference case . I n 2020 , th e electricit ypric e i n th e ful l competitive pricin g cas e i s highe rtha n i n th e referenc e cas e becaus e o f increasin g natura l ga s prices , whic h affec t margina l electricit

yprice s mor

e directl ytha n averag e prices
. Detaile d result s from th e ful l competitive pricin g cas e are presente d i n Appendi xF
. Tabl e F9
. Th e ful l competitive pricin g cas e als o assume s tha t som e consumer s wil l b e abl e t o respon d t o time-of-us e pricin g b yalterin g thei rdeman d patterns . Throug h "load-shifting, " consumer s ca n reduc e usag e durin g a pea k period , whe n price s are hig h an d suppl yi s tight , an d shift tha t usag e t o a n off-pea k period
. Th e net effec

t i s lowe rpea k

deman d an d a flatte rdeman d patter n forth e year , wit h les s variatio n betwee n th e lowes t an d highest points
. Load shiftin g coul d als o reduc

e th e nee d fo rne

w capacity , becaus e pea k deman d woul d b e lower , s o that differen t types of capacit ywoul d b e built
. I n th e ful l competitive pricin g case , 2 8 gigawatts les s ne w capacit yi s projecte d t o b e buil t b y202 0 

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### Annua l Energy Outlook

lyy y - Issue s i

n Focu s Pag e 9 of 2 4 tha n i n th e reference case . Som e o f th e differenc e result s fro m lowe rreserve margin s overal l unde rful l competitive pricin g (reserve margin s ar e projecte d t o b e as much a s 3 percentag e points lowe rnationally) , bu t a portio n i s als o du e t o th e flatte rload pattern . Sectora l Pricin g o f Electricit yi n Competitiv e Market s Th e emergenc

e of competitive market

s fo rgeneratio n i n th e electricit yindustr y ha s create d th e potentia l fo ra ne w distributio n o f cost s an d benefits amon g classe s of utilit

ycustomers . Traditionally , rate s were se t b yregulator

s o n th e basi s of "embedde d costs"—th e averag e cos t of producin g electricit yan d servin g th e customer , includin g bot h short-ru n cost s suc h a s fue l an d long-ru n cost s suc h as plan t an d capita l recovery . Becaus e rate s were set t o cove ral l costs , includin g retur n o n capita l invested , thi s wa s referre d t o as "rate-ofretu m regulation. " Rate s wer

e generall yse t t o reflec

t averag e cost s rathe rtha n th e mor e volatil e fluctuation s i n margina l costs . Historically , give n th e larg e transactio n cost s associate d wit h real-tim e pricing , averag e cost pricin g was see n as ensurin g tha t revenue s woul d cove rtota l costs . Becaus e som e activitie s o rinvestments , suc h as maintenance of a substation , serve multipl e custome rclasses , regulator s develope d variou s method s of allocatin g th e cost s t o differen t custome rclasses
. Typically , bot h fairnes s an d efficienc

y[25 1 playe d a rol e i n settin g custome rclas s tariff s [26]. Th e changin g natur

e of th e electri c utilit

yindustr ywil l undoubtedl ymodif

yth e patter n of allocation s o

f cost s amon g custome rclasses , wit h market forces havin g a greate rrole
. Althoug h al l customer s are expecte d t o benefi t eventuall y fro m th e introductio n o

f competitio n i n th e generatio n function , th e rate an d degre e of suc h benefits ma yvar yb ycustome rclass
. Figure 1 6 show s sectora l price s of electricit

yi n th e Unite d Kingdo m durin g th e perio d 1988-1996—whe n th e electricit

yindustr ywa s privatize d an d competitio n wa s introduce d i n th e generatio n sector—indexe d t o 1988 prices
. Profitabilit yi n th e regulate d market wa s allowe d t o ris e fo r2 year s befor e th e introductio n of competitio n i n 1990
. Saving s fro m th e introductio n o f competitio n were realize d mor e quickl yb

yth e large rcustomer

s firs t Figur e 16
. Rea l electricit

yprice s i n th e Unite d Kingdo m afte rderegulation
. 1988-199 6 (index
. 1988 = 1.0 ) [sources ] Initiall yonl yth e largest customer s i n th e Unite d Kingdom , thos e wit h pea k load s o f mor e tha n 1 megawat

t (approximatel yth e siz e o f 50 0 households) , had a choice of suppliers
. Thes e customer s wer e referre d t o a s non-franchis e customers , an d theyhad th e choic e o f an yo f th e 1 2 Regiona l Electricit y Companie s (RECs) , o rothe rindependen t generatin g companies
. Franchis e customers , primaril yresidentia l an d smal l commercial/wer e require d t o purchas e electricit

ythroug h thei rloca l RECs
. Th e franchis e threshol d wa s lowere d t o 100 kilowatt s i n 1994 , an d al l customer s were t o hav

e choice o f supplier s b yth e en d o

f 1998
. I n general , ove rthi s time , smal l consumer s have see n onl ymodes

t price reductions
. As th e franchis e limitation s were removed , firs t larg e an d the n mediu m industria l customer s receive d greate rbenefits , althoug h ther e wa s a goo d dea l o f variatio n i n th e experience of industria l customers . Som e ver y larg e industria l customers , participant s i n th e "qualifyin g industria l custome r scheme " (QUICS ) progra m befor e privatization , initiall ysa w price increase s an d hav e receive d relativel ylittl e benefi t from th e competitiv e market [27]. As show n i n Figur e 16 , eve n afte ra transitio n period , i t i s likel ythat th e effec t of deregulatio n wil l var

yb ycustome rclass
. A s market

s are restructured , firm s hav e incentive s t o chang e thei rpricin g t o meet specialize d demands
. A n exampl e i s th e U.S
. natura l ga s market fo r transmissio n services , where restructurin g resulte d i n a wide rarra yo f option s fo rsom e customers . I n particular , thos e customer s wit h mor

e flexibilit yi n thei r transmissio n an d distributio n requirements were i n a positio n t o reduce thei r overal l price o f service
. Thos e users , primaril ylarg e industria l consumers , 

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### Annua l Energ y Outloo k

199 9 - Issue s i n Focu s Pag e 1 0 o f 2 4 benefite d mos

t fro m th e restructure d natura l ga s market [28\. Figur e 1 7 show

s th e transmissio n an d distributio n marku p (th e differenc e betwee n th e wellhea d an d end-us e price s of natura l gas ) b ysecto rfro m 1985 t o 1996 , indexe d t o 1985
. As shown , th e averag e price of transmissio n an d distributio n fo rindustria l user s decline d significantl ymor e (o n a percentag e basis ) tha n tha t fo r residentia l users . Figur e 17
. Inde xo f rea l U.S
. natura l gas transmissio n an d distributio n markup s b yend-us e sector . 1985-199 6 (index , 1985 = 1.0 ) [sources ] Traditionally , a n electri c utilit ywas grante d a n exclusiv e franchis e ove rits territor yan d serve d a s a regulate d monopoly
. Becaus e customer s ar e easil y identifie d b

ydeman d leve l an d hav

e differen t pric e elasticitie s o f demand , a utilit yca n charg e differen t price s t o differen t customers . I n a regulate d monopoly , there i s n o inheren t requiremen t that price s equa l long-ru n averag e costs . I n orde rfo rth e revenu e requirements o f th e utilit yt o b e met , som e price differential s must b e established
. That is , i f ever ycustome rclas s wer e charge d it s incrementa l cost of service , a utilit ymigh t not cove rit s tota l costs . Allocatio n of suc h cost s ove ran d abov e th e incrementa l cost s are decide d b yregulators
. Suc h allocations , translate d into rates , resul t i n differen t price s pe rkilowatthou r fo rdifferen t customers . Such difference s are inheren t i n traditiona l rat e developmen t [29]. Give n th e traditiona l marke t structur e of a regulate d monopoly , efficienc y consideration s encourag e th e adoptio n o f a pricin g approac h wherebyclasse s of customer

s wit h inelasti c demand s pa ya highe rmarku p ove rmargina l cos t tha n thos e wit h mor

e elasti c demand s __[
. However , th e goa l of equit ylead s policymaker

s t o se t price s tha

t ar e see n as fai ran d reasonable
. Thi s goa l ca n lead regulator

s t o deviat e fro m th e economicall yoptima l pricin g methodolog ys o a s t o avoi d imposin g "unreasonably " hig h price s o n group s wit h inelasti c demands
. Thus , regulate d sectora l pricin g deviate s fro m economicall yoptima l pricing , becaus e bot h equit yan d efficienc

yare importan t i n settin g rates. Figur e 1 8 compare s actua l price s of electricit yb ycustome rclas s i n 1996 wit h a n estimat e o f wha

t suc h price s woul d loo k

lik e i f th e cost s were allocate d i n a n economicall yoptima l (market-based ) manner . Th e result s indicat e that curren t industria l an d commercia l price s are largel yhighe ran d curren t residentia l price s ar e lowe rtha n th e price s associate d wit h th e economicall yoptima l solution
. Significan t change s ma yoccu rwhe n there i s a restructure d electricit y generatio n market
. Figur

e 1 9 compare s th e generatio n pric e b ycustome rclas s i n th e ful l competitio n case , i n whic h generatio n i s assume d t o b e price d o n a margina l cos t basis
. I t i s als o assume d that , throug h th e functio n o f a n independen t syste m operato r(ISO ) o rothe rmarket structure , th e generatio n componen t o f pric e a t an yon e tim e wil l b e equa l fo ral l customers . That is , th e differenc e betwee n th e averag e yearl ypric e of th e generatio n componen t o f electricit yfo rdifferen t custome rclasse s depend s onl yo n th e fractio n o f annua l electricit yrequirements purchase d durin g high-price d periods
. Wit h thes e assumptions , th e averag e annua l generatio n price s are nearl yequa l fo rth e differen t custome rclasses
. Figur e 18
. Actua l 199 7 electricit yprice s b ysecto ran d calculate d price s wit h optima l pricin g (199 7 mill s pe rkilowatthour ) [sources ] Figur e 19
. Generatio n componen t o f electricit yprice s b yend-us e sector . 1999 - 202 0 (199 7 mill s pe rkilowatthour ) [sources ] Th e reaso n tha t sectora l generatio n price s are nearl yequivalen t i s illustrate d b y th e representative price-duratio n curve show n i n Figure 20 , depictin g th e ranked hourl ypric e o f electricit yfrom th e most expensive t o th e leas t expensive hour
. Th e ke

yfeature of th e grap h i s tha t th e price-duratio n curv e i s relativel y fla t o n a per-kilowatthou rbasis
. A fla t curve shows that , excep t fo ra limite d numbe rof pea k

hours , th e price o f generatin g electricit yi s relativel yconstant . Therefore , i n a full ycompetitive market , th e generatio n pric e i s simila rfo ral l custome rclasses
. 

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### Annua l Energy Outlook

1999 - Issue s i

n Focu s Page 1 1 of 2 4 Figur e 20
. Electricit

ygeneratio n pric

e duratio n curve fo rth e Ne w Englan d regio n (199 7 mill s pe rkilowatthour ) [sources ] Althoug h bot h transmissio n an d distributio n ar e assume d t o b e regulated , ther e i s reaso n t o believe tha t th e unbundlin g of generatio n fro m transmissio n an d distributio n ma

yprovid e mediu m an d larg e consumer s wit h a greate rabilit

yt o obtai n price concession s fro m th e operato ro f th e distributio n system . Specifically , unde rth e ne

w market structure , som e consumer s ma yhav e th e abilit yt o bypas s th e distributio n syste m a t relativel ylo

w cos t b yconnectin g directl yt o th e transmissio n syste m o rbuildin g a n on-sit e generator . Concessionar

ypricing , i.e. , change s i n th e allocatio n of fixe d cost s amon g th e custome rclasses , ma

yb e necessar

yt o retai n suc h customers . Figur e 2 1 compare s th e industria l price i n th e reference cas e wit h that i n th e full ycompetitive case , includin g concessionar ypricin g o f transmissio n an d distribution
. As a counterpoint , anothe rprojectio n i s shown , base d o n th e assumptio n that industria l customer s woul d b e unabl e t o obtai n an yadditiona l concession s from th e operator s of th e transmissio n an d distributio n syste m (n o concessionar

ypricing)
. I f averag e generatio n price s b ycustome rclas s ten d t o converge , i t i s possibl e that industria l price s coul d ris e significantl yabove th e reference cas e pric e withou t reallocatio n o f cost s withi n th e regulate d transmissio n an d distributio n sector . Price s woul d b e modestl yhighe rtha n thos e i n th e reference cas e i f suc h reallocatio n occurred
. Figur e 21
. U.S
. industria l electricit yprice s unde rthre e fixe d cos t allocatio n options
. 1999-202 0 (199 7 mill s pe rkilowatthour ) fsources l Figur e 2 2 compare s nationa l sectora l price s i n th e full ycompetitive market cas e wit h thos e i n th e reference case . Give n that simila refficienc yimprovements are assume d i n th e reference an d ful l competitio n cases , i t i s not surprisin g tha t th e price path s are similar
. However , thi s analysi s assume s that , i f pricin g i s nondiscriminator

yi n th e generatio n market , large rcustomer s wil l nonetheles s maintai n thei rabilit

yt o achieve lowe rrate s throug h market pressure s o n th e remainin g regulate d portion s o f th e industry
. Figur e 22
. U.S
. electricit

yprice s b

yend-us e secto ri n th e reference an d ful l competitio n cases . 1999-202 0 (199 7 mill s pe rkilowatthour ) fsources l Althoug h th e approac h towar d analyzin g sectora l price s represent s a n advance ove rpreviou s EI A analyses , a grea t dea l of uncertaint

yremains
. Clearly , th e precis e market structure s tha t evolve wil l hav e a significan t effec

t o n pnce , a s wil l th e exten t an d spee d a t whic h ne

w technologies , a s wel l as market forces , influence th e ratemakin g process . Moreover , th e validit yo f thes e projection s depend s o n th e consistenc ybetwee n ElA' s assumption s abou t market structure s an d thei ractua l performance
. Finally , an yassumption s abou t regulators ' behavio rare subjec t t o change s i n th e overal l regulator y environment
. Gasolin e Sulfu rReductio n I n earl y1999 , th e U.S
. Environmenta l Protectio n Agenc y(EPA ) i s expecte d t o propos e tighte rrestriction s o n th e amoun t o f sulfu rallowe d i n gasoline
. Becaus e gasolin e sulfu ran d automotive emission s are linked , th e proposa l wil l b e issue d i n conjunctio n wit h th e ne w "Tie r2 " vehicl e exhaus t emission s standard s that woul d take effec t betwee n mode l year

s 200 4 an d 200 7 (se e "Legislatio n an d Regulations,")
. Sulfu rreduce s th e effectivenes s o f th e catalys t use d i n th e emission s contro l system s of advance d technolog yengines , increasin g thei remission s o f hydrocarbons , carbo n monoxide , an d NO x . A s a result , gasolin e wit h significantl yreduce d sulfu rlevel s wil l b e require d fo rth e contro l system s t o wor k

propert yan d mee

t th e ne w Tie r2 standards
. Th e EP A has bee n considerin g lowerin g th e averag e annua l sulfu rconten t o f gasolin e t o betwee n 15 0 an d 3 0 parts pe rmillio n (ppm) , fro m th e existin g 

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### Annua l Energ y Outloo k

199 9 - Issue s in Focu s Pag e 1 2 o f 2 4 standar d o f 1,00 0 ppm . Th e curren t nationa l averag e gasolin e sulfu rconten t i s 34 0 pp m [37]
. Th e existin g limi t fo ral l gasolin e i n Californi a i s a n annua l averag e o

f 30 ppm , wit h a ca p o

f 8 0 ppm , o ra flat (unaveraged ) limi t o f 40 ppm . Discussion s o

f California-lik

e sulfu rlimits ma

yb e frame d i n term s of a "3 0 ppm " o ra "4 0 ppm " limit , bu t fo ral l intents an d purposes , th e two ar e th e same . A join t stud yb

yth e EP A an d th e U.S
. Departmen t of Energy(DOE ) pu t preliminar ysulfu rreductio n costs fo rEas t Coas t an d Gul f Coast refiner

s a t 5. 1 t o 8. 0 cents a gallo n fo r4 0 pp m gasolin e an d 1. 1 t o 1. 8 cent s a gallo n fo r150 pp m gasoline
. A studysponsore d b yth e America n Automobil e Manufacturer s Associatio n estimate d th e cost o f reducin g sulfu rt o 4 0 pp m a t 5. 5 cents a gallo n fo rrefiner

s i n th e easter n hal f of th e country . Anothe rstud ysponsore d b y th e America n Petroleu m Institut e (API ) estimate d th e cost s of sulfu rreductio n at 5. 1 cent s a gallo n fo r4 0 pp m gasolin e an d 2. 7 cent s a gallo n fo r15 0 pp m gasolin e [32\. Althoug h there i s a broad consensu s that gasolin e sulfu rmust b e reduced , th e leve l of reductio n an d th e applicatio n o f th e requiremen t have bee n intensel y debated
. I n additio n t o determinin g th e appropriat e sulfu rlevel , th e EP A i s considerin g whethe rt o mak e sulfu rreductio n a nationa l o rregiona l requirement
. Th e rang e o f sulfu rreductio n option s unde rconsideratio n b yth e EP A i s bounde d b

yproposal s fro m two groups : automakers—th e America n Automobil e Manufacturer s Associatio n an d th e Associatio n o f Internationa l Automobil e Manufacturers—an d gasolin e producers—th e America n Petroleu m Institut e (API ) an d th e Nationa l Petrochemica l an d Refiner s Associatio n (NPRA)
. AE099

include s th e tw

o proposal s as alternative case s t o explor e thei r potentia l impact

s o n th e long-ter m projection s o f gasolin e suppl yan d prices
. Th e automaker

s propos e t o reduce th e averag e allowabl e sulfu rconten t of gasolin e i n th e Unite d State s t o 4 0 ppm , whic h i s equivalen t t o th e curren t standar d i n th e Stat e o f California
. Th e API/NPR A submitte d a les s stringen t regiona l proposa l i n whic h al l gasolin e i n Federa l reformulate d gasoline'areas , i n 2 3 States , an d i n Eas

t Texa s woul d mee

t a n annua l averag e of 15 0 pp m [33\; gasolin e i n Californi a woul d continu e t o mee t th e State' s gasolin e requirements , includin g th e 4 0 pp m annua l averag e sulfu rlimit ; an d gasolin e i n al l othe rparts o f th e countr

ywoul d hav

e a n annua l averag e of 30 0 ppm . API/NPRA propose s furthe rsulfu rreduction s b y201 0 i n area s that require year-roun d NO xcontrol
. Th e area s of coverag e an d th e leve l of sulfu rreduction s woul d b e determine d b ya n EP A study
. I n th e API/NPRA analysi s case , al l th e area s require d t o us e 15 0 pp m gasolin e i n 200 4 were assume d t o requir e furthe rreduction s t o 4 0 pp m b y2010
. A s expected , th e price impac t i s greate ri n th e cas e base d o n th e automakers ' proposa l (whic h i s a mor

e severe , nationwid e plan ) tha n i n th e API/NPRA case . Bot h case s assum e that th e additiona l cost s associate d wit h sulfu rreduction s woul d b e passe d o n t o consumers . Relative t o th e AE099 referenc e case , th e API/NPRA scenari o increase s th e averag e price o f gasolin e b y1. 3 cent s a gallo n i n 2004 an d b

y4. 9 cents a gallo n i n 2010
. Th e automakers ' scenari o increase s th e price b

y8. 3 cent s a gallo n i n 2004 an d 6. 8 cent s i n 2010
. Th e API/NPRA scenari o increase s tota l consume rspendin g fo rgasolin e b y$1. 8 billio n i n 200 4 relative t o th e AE099 reference cas e an d b

y$7. 6 billio n i n 2010
. I n th e automakers ' scenario , th e correspondin g increase s are $11. 7 billio n i n 200 4 an d $10. 5 billio n i n 2010
. I n bot h cases , th e pric e increase s reflec t investments i n sulfu rreductio n processe s a t refineries , a s wel l a s change s i n th e selectio n of refiner

yinputs
. Befor e 2010 , th e cos t o f sulfu rreductio n i s lowe ri n th e API/NPRA scenari o becaus e sulfu rreductio n t o th e 30 0 an d 150 pp m level s ca n b e achieve d largel y b yadjustments i n refiner

yprocesses . O n th e othe rhand , sulfu rreductio n t o th e 4 0 pp m level , reflecte d i n th e automakers ' scenari o an d afte r201 0 i n th e API/NPRA scenario , ca n onl yb e achieve d b ymor e costl yrefiner

yupgrades , includin g naphth a hydrotreating , ga s oi l desulfurization , alkylation , an d hydroge n units
. A n interestin g feature of bot h scenario s i s that theylead t o a projecte d increas e http://www.eia.doe.gov/oiaCaeo99/issues.htm l 1/2/0 1 Q]^-
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### Annua l Energy Outlook

1999 - Issue s i

n Focu s Pag e 1 3 o f 2 4 i n domesti c productio n o

f gasolin e an d blendin g component s relative t o th e reference cas e projections , wit h a correspondin g reductio n i n projecte d imports
. O n th e othe rhand , th e reduction s i n imports of gasolin e an d blendin g components ar

e mor e tha n offset b

yincrease d requirements fo rcrud e oi l imports
. Th e net resul t i s that imports represen t th e sam e shar e of tota l projecte d petroleu m requirements i n th e API/NPRA scenari o a s i n th e AE099 reference cas e an d a slightl yhighe rpercentag e i n th e automakers ' scenario
. Th e Kyot o Protoco l an d Carbo n Emission s Greenhouse

Gas Emissions

and the Framework

Convention Th e greenhous e effec

t i s a natura l proces s b

ywhic h som e of th e radian t hea t fro m th e su n i s capture d i n th e lowe ratmospher e of th e Earth , thu s maintainin g th e temperatur

e o f th e Earth' s surface
. Th e gase s tha t hel p captur

e th e heat , calle d "greenhous e gases, " includ e wate rvapor , carbo n dioxide , methane , nitrou s oxide , an d a variet yo f manufacture d chemicals
. Som e ar e emitte d fro m natura l sources ; other

s resul t from anthropogenic , o rhuman , activities
. Ove rth e pas t severa l decades , risin g concentration s of greenhous e gase s hav e bee n detecte d i n th e Earth' s atmosphere , an d i t ha s bee n suggeste d that thi s ma y lead t o a n increas e i n th e averag e temperatur e of th e Earth' s surface an d consequentl yt o detrimenta l effects
. I n 1988 , th e Intergovernmenta l Pane l o n Climat e Chang e (IPCC ) wa s establishe d b

yth e Worl d Meteorologica l Organizatio n an d th e Unite d Nation s Environmen t Programm e t o asses s th e scientific , technical , an d socioeconomi c informatio n i n th e fiel d of climat e change
. Th e mos t recen t repor

t o f th e IPC C conclude d that : "Ou rabilit yt o quantif

yth e huma n influence o n globa l climat e i s currentl ylimite d becaus e th e expecte d signa l i s stil l emergin g from th e nois e of natura l variability , an d becaus e there are uncertaintie s i n ke yfactors
. Thes e includ e th e magnitud e an d pattern s of lon g ter m natura l variabilit yan d th e time evolvin g patter n o

f forcin g by , an d respons e to , change s i n concentration s o f greenhous e gase s an d aerosols , an d lan d surfac e changes
. Nevertheless , th e balance of evidence suggests tha t there i s a discernibl e huma n influence o n globa l climate " [34]. Followin g a serie s o

f negotiatin g sessions , th e tex t of th e Framewor k Conventio n o n Climate Chang e wa s adopte d at th e Unite d Nation s o n Ma y9 , 1992 , an d opene d fo rsignatur e at Ri o d e Janeiro , Brazil , o n Jun e 4
. Th e objective of th e Framework Conventio n wa s to"..
. achieve..
. stabilizatio n of th e greenhous e ga s concentration s i n th e atmospher e at a leve l that woul d preven t dangerou s anthropogeni c interferenc e wit h th e climat e system. " Th e signatorie s agree d t o formulat e program s t o mitigat e climat e change
. Furthermore , th e develope d countr ysignatorie s agree d t o adopt nationa l policie s t o retur n anthropogeni c emission s of greenhous e gase s t o thei r199 0 levels
. Th e Conventio n exclude s chlorofluorocarbon s (CFCs ) an d hydrochlorofluorocarbon s (HCFCs) , greenhous e gase s that are deeme d t o caus e damag e t o th e Earth' s stratospheri c ozon e an d ar e controlle d b

yth e 198 7 Montrea l Protoco l o n Substance s tha t Deplete th e Ozon e Layer
. Respondin g t o th e Framework Convention , o n Apri l 21,1993 , Presiden t Clinto n calle d upo n th e Unite d State s t o stabiliz e greenhous e ga s emission s b y200 0 at 199 0 levels
. Specifi c step s t o achieve U.S
. stabilizatio n were enumerate d i n th e Climat e Chang e Actio n Pla n (CCAP ) [35 L publishe d i n Octobe r1993 , whic h consist s o f a serie s of 44 action s t o reduce greenhous e ga s emissions
. Thes e action s includ e voluntar

yprograms , industr

ypartnerships , governmen t incentives , researc h an d developmen t regulator yprograms , includin g energ yefficienc

ystandards , an d forestr

yactions
. Greenhous e gase s affecte d b ythes e action s includ e carbo n dioxide , methane , nitrou s oxide , hydrofluorocarbon s (HFCs) , an d perfluorocarbon s (PFCs)
. At th e time CCA P wa s developed , th e Administratio n estimate d tha t th e action s i n CCA P woul d reduce th e tota l net emission s [36[ o f thes e greenhous e gase s t o 199 0 level s b y 2000
. 

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### Annua l Energ y Outlook 1999 - Issue s i

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I n additio n to th e climate-relate d action s o f CCAP , th e EnergyPolic yAc t of 199 2 (EPACT) , Sectio n 1605(a) , provide d fo ra n annua l inventor yo f U.S
. greenhous e ga

s emissions , whic h i s containe d i n th e EI A publicatio n series , Emissions

of Greenhouse

Gases in the United States [37J
. Also , Sectio n 160

5 (b ) of EPAC

T establishe d th e Voluntar yReportin g Program , permittin g corporations , governmen t agencies , households , an d voluntar yorganization s t o repor t t o EI A o n action s that hav e reduce d o ravoide d emission s o f greenhous e gases . Th e results o

f th e Voluntar

yReportin g Progra m ar

e reporte d annuall yb

y EIA , mos t recentl yi n Mitigating

Greenhouse

Gas Emissions:

Voluntary Reporting

1996 [38\. Entitie s providin g data to th e Voluntar yReportin g Progra m includ e som e participants i n government-sponsore d voluntar yprograms , suc h a s th e Climate Wis e an d Climate Challeng e programs , whic h ar e cosponsore d b yth e EP A an d DO E t o foste rreduction s i n greenhous e ga s emission s b y industr yan d electricit

ygenerators . The Kyoto Protocol Th e Framework

Conventio n establishe d th e Conference of th e Partie s t o "revie w th e implementatio n of th e Conventio n an d
.. . make , withi n its mandate , th e decision s necessar

yt o promote th e effective implementation. " Th e firs t an d secon d Conference o

f th e Partie s i n 1995 an d 1996 agree d t o addres s th e issu e o f greenhous e ga s emission s forth e perio d beyon d 200 0 an d negotiat e quantifie d emissio n limitation s an d reduction s fo rth e third Conference of th e Parties
. O n Decembe r1 throug h 11,1997 , representative s fro m mor e tha n 160 countrie s me

t i n Kyoto , Japan , t o negotiat e bindin g limit s fo rgreenhous e ga s emission s fo rdevelope d nations
. I n th e resultin g Kyoto Protocol , emission s target s were establishe d fo rthes e nations , th e AnnexI countrie s [39J , relative t o thei remission s i n 1990 , t o achieve a n overal l reductio n o f abou t 5. 2 percen t [40] - Th e individua l target s fo rth e AnnexI countrie s rang e from a n 8-percen t reductio n fo rth e Europea n Unio n (EU ) (o rits individua l membe rstates ) t o a 10 - percen t increas e allowe d fo rIceland
. Australi a an d Norwa yare als o allowe d increase s of 8 an d 1 percen t respectively , whil e Ne w Zealand , th e Russia n Federation , an d th e Ukrain e are hel d t o thei r199 0 levels
. Othe rEastern Europea n countrie s undergoin g transitio n t o a marke t econom yhav e reductio n target s of betwee n 5 an d 8 percen t Th e reductio n target s forCanad a an d Japa n ar e 6 percen t an d fo rth e Unite d State s 7 percen t Non-Anne xI countrie s hav e n o target s unde rth e Protocol , althoug h th e Protoco l reaffirm s th e commitments of th e Framewor k Conventio n b

yal l partie s t o formulat e an d implemen t climat e chang e mitigatio n an d adaptatio n programs . Th e greenhous e gase s covere d b yth e Protoco l ar

e carbo n dioxide , methane , nitrou s oxide , hydrofiuorocarbons , perfluorocarbons , an d sulfu rhexafiuorid e [41]. Th e aggregat e targe t i s establishe d usin g th e carbo n dioxid e equivalen t o f eac h o f th e greenhous e gases . Fo rth e thre e syntheti c greenhous e gases , countrie s hav

e th e optio n of usin g 1995 a s th e bas e year . Source s o f emission s includ e energ ycombustion , fugitiv e emission s from fuels , industria l processes , solvents , agriculture , an d wast e managemen t an d disposal
. Th e Protoco l doe s not prescrib e specifi c action s t o b e take n bu t list s a numbe ro f potentia l actions , includin g energyefficienc yimprovements , enhancemen t of carbon-absorbin g sinks , suc h as forest s an d othe rvegetation , researc h an d developmen t of sequestratio n technologies , phasin g ou t of fisca l incentive s an d subsidie s that ma yinhibi t th e goa l o f emission s reductions , an d reductio n o f methan e emission s i n wast e managemen t an d i n energ yproduction , distribution , an d transportation
. Th e target s mus

t b e achieve d o n averag e ove rth e commitmen t perio d 200 8 t o 2012 , th e firs t commitmen t period
. Eac h countr yca n averag e it s emission s ove r tha t 5-yea rperio d t o establis h compliance , smoothin g ou t short-ter m fluctuation s that migh t occu rdu e t o economi c cycle s o rextrem e weathe r patterns . Countrie s mus

t hav e mad e demonstrabl e progres s b y2005 , bu t n o target s are establishe d fo rth e perio d afte r201 2 (althoug h lowe rtargets ma yb e se t b yfuture Conference s o f th e Parties)
. Banking—carryin g ove rof unuse d allowance s from on e commitmen t perio d t o th e next—i s allowed ; however , th e 

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f emission s allowance s fro m a future commitmen t perio d i s no t permitted
. Severa l provision s o

f th e Protoco l allow fo rsom e flexibilityi n meetin g th e emission s targets . Ne

t change s i n emission s b

ydirec t anthropogeni c land-us e change s an d forestr

yactivitie s wil l als o b e used i n meetin g th e commitment ; however , the

yar e limite d t o afforestation , reforestation , an d deforestatio n since 1990
. Emission s tradin g amon g th e Anne xI countrie s i s permitted
. Accordin g t o ElA' s International

Energy Outlook

1998 (IEQ98) [42], th e amoun t o

f carbo n tha t ma yb e availabl e fo rtrad e fro m th e Anne xI countrie s o f th e forme rSoviet Unio n as a resul t o

f th e economi c declin e i n thos e countrie s i n th e 1990s i s estimate d a

t 16 5 millio n metri c ton s i n 2010
. Also , additiona l carbo n permits ma ybe available
. Join t implementatio n projects ar e allowe d amon g th e Anne xI countries , allowin g a natio n t o tak e emission s credit s fo rproject s tha t reduce emission s o renhanc

e emissions-absorbin g sinks , suc h a s forest s an d othe r vegetation , i n othe rAnnexI countries
. I t i s specificall yindicate d that tradin g an d join t implementatio n are supplementa l t o domesti c actions
. Th e Protoco l als o establishe s a Clea n Developmen t Mechanis m (CDM) , unde r whic h AnnexI countrie s ca n ear n credit s fo rprojects tha t reduce emission s i n non-Anne xI countrie s provide d that th e projects lead t o measurable , long-ter m benefits
. Reduction s from suc h project s undertake n fro m 200 0 unti l th e firs t commitmen t perio d ca n b e use d t o assis t wit h complianc e i n th e firs t commitmen t period
. Thi s provisio n call s fo rth e establishmen t o f a n executive boar d t o overse e th e projects
. I n addition , a n unspecifie d shar e of th e proceed s from th e projec

t activitie s mus

t b e use d t o cove radministrative expense s an d t o assist wit h adaptatio n i n countrie s that ar e particularl yvulnerabl e t o climat e change
. Anne xI countries , suc h a s th e EU , ma ycreat e a bubbl e o rumbrell a t o mee t th e tota l commitmen t o f al l th e membe rnations
. I n a bubble , countrie s agre e t o meet th e tota l commitmen t jointl yb yallocatin g a share t o eac h member
. I n a n umbrell a arrangement , th e tota l reductio n of al l membe rnation s i s me t collectivel ythroug h th e tradin g of emission s rights
. There i s potentia l interes t i n th e Unite d State s enterin g int o a n umbrell a tradin g arrangement . Th e Protoco l becam e ope n fo rsignature o n Marc h 16,1998 , fo ra one-yea r period
. I t enter

s int o forc e 9 0 day

s followin g th e acceptanc e b y55 Parties , includin g Anne

xI countrie s accountin g fo ra t least 5 5 percen t of th e 199 0 carbo n dioxid e emission s fro m AnnexI nations
. Signature b yth e Unite d State s woul d nee d t o b e followed b ySenat e ratification
. A s o f Septembe r29,1998 , 5 7 countrie s had signe d th e Protocol , includin g 2 6 AnnexI nation s that accounte d fo rabou t 38 percen t of AnnexI carbo n emission s i n 1990
. I n 1990 , tota l greenhous e ga s emission s i n th e Unite d State s were 1,63 3 millio n metri c ton s carbo n equivalent
. O f thi s total , 1,34 6 millio n metri c tons , o r8 2 percent , wa s du e t o carbo n emission s fro m th e combustio n of energyfuels
. B y 1997 , tota l U.S
. greenhous e ga s emission s had risen t o 1,79 1 millio n metri c ton s carbo n equivalent , o f whic h 8 3 percen t o r1,480 millio n metri c tons , were carbo n emission s from energ ycombustion
. EI A no w project s tha t energy relate d carbo n emission s wil l reac h 1,790 millio n metri c ton s i n 2010 , 3 3 percen t abov

e th e 199 0 level , increasin g t o 1,97 5 millio n metri c ton s i n 2020
. Becaus e energy-relate d carbo n emission s constitut e suc h a larg e percentag e o f th e tota l greenhous e ga s emissions , an yactio n o rpolic yt o reduce emission s wil l affec t U.S
. energ ymarkets ; however , there are a numbe ro f factor s outsid e th e domesti c energ ymarket tha t influenc e emission s an d ma yoffse t th e impacts o n domesti c energy . T o pu t U.S
. emission s i n a globa l perspective , th e Unite d State s produce d abou t 2 4 percen t o f th e worldwid e energy-relate d carbo n emission s i n 1996 , whic h totale d 6. 0 billio n metri c tons , accordin g t o IE098. Althoug h carbo n emission s continu e t o increas e i n th e Unite d State s an d othe rindustrialize d countries , the

yare increasin g at a muc h mor e rapid rat e i n th e developin g countrie s o f Asia , th e Middl e East , Africa , an d Centra l an d Sout h America
. A s a result , globa l carbo n emission s from energyar e expecte d t o increas e a

t a n averag e annua l rat e o

f 2. 4 percen t from 1996 throug h 2010 , reachin g 8. 3 billio n 

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n Focu s Page 1 6 o f 2 4 metri c tons , t o whic h th e Unite d State s i s expecte d t o contribut e abou t 22 percent . EIA Analysis

of the Kyoto Protocol A t th e request of th e U.S
. House o f Representative s Committe e o n Science , EI A performe d a n analysi s o f th e Kyot o Protoco l i n th e summe ro f 1998 , focusin g o n th e impacts o f th e Protoco l o n U.S
. energ yprices , energyuse , an d th e econom yi n th e 200 8 t o 201 2 tim e frame
. Th e analysi s wa s publishe d i n Impacts of the Kyoto Protocol

on U.S. Energy

Markets and Economic

Activity [43]. Th e request specifie d that th e analysi s us e th e sam e methodologie s an d assumption s a s th e AE098 [44], wit h n o change s i n policy , regulator yactions , o rfundin g fo renerg yan d environmenta l programs . Th e Committe e indicate d tha t n o ne w nuclea rplants shoul d b e allowed , althoug h economi c lif e extension s o

f nuclea rplants shoul d b e permitted
. Constructio n of ne w nuclea r plants , variation s i n economi c growth , an d differen t assumption s concernin g technolog ycharacteristics wer e al l t o be analyze d as sensitivitie s t o th e targe t cases . Th e EI A analysi s assume s that th e Governmen t woul d hol d a n auctio n of carbo n permits
. Th e cost o f th e permit

s i s reflecte d i n energ yprices , an d th e revenue s collecte d from th e permits are recycle d eithe rt o individual s b ymean s of a n incom e taxrebat e o rt o individual s an d businesse s throug h a socia l securit yta xrebate
. Th e Protoco l include s a numbe rof internationa l provisions , includin g internationa l emission s trading , join t implementatio n projects , an d CDM , whic h ma yreduce th e cos t of compliance ; however , guideline s fo rth e provision s mus t b e resolve d a

t future meeting s o

f th e Conference s of th e Parties
. (Th e fourt h Conference wa s underwa yi n Buenos Aires , Argentina , at th e tim e AE099 wen t t o press. ) I n addition , rule s an d guideline s forth e accountin g o f emission s an d sink s fro m activitie s relate d t o agriculture , lan d use , an d forestr yactivitie s must b e developed
. Th e specifi c guideline s ma yhave a significan t impac t o n th e leve l of reduction s from othe rsource s that a countr ymus t undertake
. Reduction s i n th e othe rgreenhous e gase s ma yals o offse t th e reduction s require d from carbo n dioxide
. A fac t sheet issue d b

yth e U.S
. Departmen t o f Stat e o n Januar

y15,1998 , discussin g th e Protocol , estimate d that th e metho d of accountin g fo rsink

s an d th e flexibilit

yt o us e 1995 a s th e bas e yea rfo rth e syntheti c greenhous e gase s ma yreduc e th e U.S
. targe t fo renergy-relate d carbo n emission s t o 3 percen t belo w 1990 levels_[45L
. Becaus e of thes e uncertaintie s concernin g th e fina l implementatio n of th e Protocol , ElA' s analysi s include s case s wit h a rang e o f reduction s fo renergy relate d carbo n emission s withi n th e Unite d State s i n orde rt o analyz e th e energ yan d economi c impacts o f achievin g thos e reduction s o n th e U.S
. energ y syste m an d th e economy . Th e case s assum e tha t th e reduction s neede d t o mee t th e targe t o f 7 percen t belo w th e 199 0 emission s leve l that ar e not obtaine d from domesti c energy-relate d reduction s woul d com e fro m som e combinatio n of forestr

yan d agricultura l sinks , offset s fro m othe rgreenhous e gases , internationa l trading , an d othe rinternationa l activities
. Fo rexample , th e case s wit h th e leas t stringen t reduction s i n energy-relate d carbo n emission s implicitl yassum e considerabl e internationa l actions
. Th e analysi s include s si xcarbo n emission s reductio n cases , plu s a referenc e case , define d a s follows :

• Reference

Case (33 Percent above 1990 Levels). Thi s cas e represent s th e referenc e projection s o f energ ymarkets an d carbo n emission s withou t an yenforce d reductions , i n orde rt o compar e th e energ ymarket impacts i n th e reductio n case s wit h a referenc e case . Althoug h thi s cas e i s base d o n th e reference cas e fro m AE098, there are smal l difference s i n orde rt o permi t additiona l flexibilit yi n respons e t o highe renerg yprice s o rt o includ e certai n analyse s previousl ydon e offlin e directl ywithi n th e modelin g framework , suc h a s nuclea rplan t lif e extensio n an d generatin g plan t retirements
. Also , som e assumption s are modifie d t o reflec t mor e 

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recen t assessments o

f technologica l improvements an d costs . As a resul t o f thes e modifications , energy-relate d carbo n emission s i n 201 0 ar e slightl yreduce d fro m th e AE098 referenc e cas e leve l o

f 1,80 3 millio n metri c tons t o 1,79 1 millio n metri c tons .
• 24 Percent above 1990 Levels (1990+24%). Thi s cas e assume s tha t carbo n emission s ca n increas e t o a n averag e of 1,67 0 millio n metri c ton s betwee n 200 8 an d 2012 , 24 percen t above th e 199 0 levels
. Compare d to th e averag e emission s i n th e reference case , carbo n emission s ar e reduce d b ya n averag e o

f 12 2 millio n metri c ton s durin g th e commitmen t period
.
• 14 Percent Above 1990 Levels (1990+14%). Thi s cas e assume s that carbo n emission s averag e 1,53 9 betwee n 200 8 an d 2012 , approximatel y a t th e leve l estimate d fo r1998 i n AE098, 1,533 millio n metri c tons . Thi s targe t i s 1 4 percen t abov e 1990 level s an d represent s a n averag e annua l reductio n of 25 3 millio n metri c ton s fro m th e referenc e case . •

• 9 Percent

Above 1990 Levels (1990+9%). Thi s cas e assume s that energy-relate d carbo n emission s ca n increas e t o a n averag e of 1,46 7 millio n metri c ton s betwee n 200 8 an d 2012 , 9 percen t abov e 199 0 levels , a n averag e annua l reductio n o f 32 5 millio n metri c ton s fro m th e reference case . Stabilization

at 1990 Levels (1990). Thi s cas e assume s that carbo n emission s reac h a n averag e of 1,34 5 millio n metri c ton s durin g th e commitmen t perio d of 200 8 throug h 2012 , stabilizin g approximatel yat th e 1990 leve l o f 1,34

6 millio n metri c tons . Thi s i s a n averag e annua l reductio n o f 44 7 millio n metri c ton s fro m th e referenc e case . 3 Percent

Below 1990 Levels (1990-3%). Thi s cas e assume s that energy-relate d carbo n emission s ar e reduce d t o a n averag e of 1,30 7 millio n metri c ton s betwee n 200 8 an d 2012 , a n averag e annua l reductio n of 48 5 millio n metri c ton s from th e referenc e cas e projections
. 7 Percent

Below 1990 Levels (1990-7%). Energy-relate d carbo n emission s are reduce d fro m th e leve l of 1,34 6 millio n metri c ton s i n 199 0 t o a n averag e of 1,250 millio n metri c ton s i n th e commitmen t period , 200 8 t o 2012
. Compare d t o th e referenc e case , thi s i s a n averag e annua l reductio n o f 542 millio n metri c ton s of energy-relate d carbo n emission s durin g that period
. Thi s cas e essentiall yassume s tha t th e 7-percen t targe t i n th e Kyoto Protoco l mus t b e share d evenl yb

yal l emittin g sources , wit h n o ne t offsets forenergy-relate d carbo n emission s fro m sinks , othe rgreenhous e gases , o rinternationa l activities
. I n eac h of th e carbo n reductio n cases , th e targe t i s achieve d o n averag e fo r eac h of th e year

s i n th e firs t commitmen t period , 200 8 throug h 201 2 (Rgur e 23)
. Becaus e th e Protoco l doe s not specif yan ytarget s beyon d th e firs t commitmen t period , th e targe t i s assume d t o hol d constan t from 201 3 throug h 2020 , th e en d o f th e forecas t horizon , althoug h mor e stringen t requirements ma yb e se t b

yfuture Conference s of th e Parties
. Th e targe t i s assume d t o b e phase d i n ove ra 3-yea rperiod , beginnin g i n 2005 , becaus e th e Protoco l indicate s that demonstrabl e progres s towar d reducin g emission s mus t b e show n b y2005
. Thi s allows energ ymarkets t o begi n adjustment s t o meet th e reductio n target s i n th e absence of complet e foresight
. I n th e analysis , som e carbo n reduction s occu rbefore 200 5 becaus e o f capacit yexpansio n decision s b yelectricit ygenerator

s tha t incorporat e th e future increase s i n energ yprices
. Figur e 23
. U.S
. carbo n emission s i n seve n Kyoto Protoco l analysi s cases . 1990-202 0 (millio n metri c tons ) fsources l Ther e ar e thre e ways t o reduce energy-relate d carbo n emissions : reducin g th e deman d fo renerg yservices , adoptin g mor e energy-efficien t equipment , an d 

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### iyy y - issue s in hocu s Pag e 1 8 o f 2 4 shiftin g to noncarbo n o rles s carbon-intensive fuels
. T o reduce emissions , th e pric e o f carbo n permits i s applie d t o eac h o f th e fuel s a

t its poin t o

f consumptio n relativ e to its carbo n content . Electricit ydoes no t directl yreceiv

e a carbo n price ; however , th e fossi l fuel s use d fo rgeneratio n receive th e price , an d thi s cost , a s wel l a s th e increase d cost o

f investmen t i n generatio n plants , i s reflecte d i n th e delivere d price o

f electricity
. I n th e analysis , th e carbo n price s represen t th e margina l cost o f reducin g carbo n emission s t o th e specifie d level , reflectin g th e price th e Unite d State s woul d b e willin g to pa

yi n orde rt o purchas e carbo n permits domestically
. Becaus e th e stud ydoe s no t includ e a n analysi s of trad e an d othe rflexibl e mechanism s t o reduce carbo n emission s internationally , th e carbo n price s d o no t represen t th e internationa l market-clearin g price of carbo n permits o rth e price othe rcountrie s woul d b e willin g t o pa yfo rpermits
. Becaus e o f it s representatio n of technology , NEM S capture s th e mos t significan t factor

s that influence th e turnove rof energy-usin g an d producin g equipmen t an d th e choice of ne w technologies
. Thus , i t i s well-suite d fo rth e analysi s of th e transitiona l impacts of policie s designe d t o influence th e choice of energy-consumin g technologies , as ne w equipmen t i s neede d t o mee t growin g deman d fo renerg yservice s o rt o replace retire d equipment
. Many sector s of NEM S includ e explici t treatmen t of individua l technologie s an d thei r characteristics , suc h a s initia l cost , operatin g cost , dat e of commercia l availability , efficiency , an d othe rcharacteristics specifi c t o th e sector . Highe r energyprice s induce mor e rapi d adoptio n o f mor

e efficien t o radvance d technologie s becaus e consumer s hav e mor e incentive t o purchas e them
. I n addition , fo rne

w generatin g technologies , th e electricit ysecto raccounts fo r technologica l optimis m i n th e capita l cost s of first-of-a-kin d plants ; an d severa l sectors , includin g th e generatio n sector , accoun t fo ra declin e i n th e cost s a s experience wit h th e technologie s i s gained
. Energy Market and Macroeconomic

Analysis. Th e analysi s indicate s tha t significan t change s i n th e mi xof energ yfuels , as wel l a s highe renerg y efficienc yan d lowe rconsumption , wil l b e neede d fo rth e require d reductions
. To induce th e changes , th e price of energ ywil l increase : Som e of th e mos t significan t result s from th e analysi s are a s follows :

• Th e cos t o f th e Kyot

o Protoco l wil l depen d o n th e amoun t o f permits that ca n b e purchase d o n th e internationa l market an d o n cost-effective projects t o reduce emission s o rdevelo p carbon-absorbin g sink s i n othe r countries
. Domesti c action s t o reduce othe rgreenhous e gase s covere d b yth e Protoco l an d t o develo p sink s ma yals o serve t o reduce th e costs .
• Th e carbo n pric e necessar yt o reduce U.S. ' energy-relate d carbo n emission s t o th e require d leve l range s fro m $6 7 t o $34 8 pe rmetri c to n (199 6 dollars ) i n 2010
. I n th e mor e stringen t reductio n cases , th e carbo n pric e fall s b

y202 0 as mor

e efficien t an d lower-carbo n technologie s becom e economicall yavailabl e an d penetrat e late ri n th e forecas t horizo n (Figur

e 24)
. Figur e 24
. Carbo n price s i n si xKyoto Protoco l analysi s cases . 1996-202 0 (199 6 dollar s pe rmetri c ton ) [sources ]

• Highe renerg yprice s an d thei rimpac t o n th e broade rU.S
. econom ywil l encourag e consumer

s t o reduce energ yconsumptio n b yreducin g th e deman d fo renerg yservice s an d purchasin g mor e efficien t equipment
. However , consumptio n wil l increas e late rwit h a growin g econom yan d lowe rcarbo n prices
. Shifts fro m mor e t o les s carbon-intensive fuel s als o occur .
• Becaus e coa l i s th e mos t carbon-intensive of th e fossi l fuels , th e pric e o f coa l wil l ris e dramatically , an d coa l us e wil l b e sharpl ycurtailed , particularl yfo relectricit

ygeneration
. I f th e carbo n price increase s t o its highest level , th e us e of coa l fo rgeneratio n ma ynearl ydisappea rb

y 

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### Annua l Energ y Outloo k

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e stringen t reductio n cases . Shrinkin g domesti c an d internationa l market

s wil l lead t o sharpl yreduce d coa l productio n an d employment
.
• Coal-fire d electricit

ygeneratio n wil l b e replace d b ygeneratio n fro m natura l ga s an d renewable s an d als o b yth e continue d operatio n of many existin g nuclea rplants
. Increase s i n natura l ga s generatio n wil l mor

e tha n offset reduction s i n natura l ga s us e b yresidential , commercial , an d industria l consumers . A s a result , th e natura l ga s industr ywil l expan d productio n an d distributio n service s (Figur e 25)
. Figur e 25
. Projecte d fue l share s of U.S
. energ yconsumptio n i n two Kyoto Protoco l analysi s cases . 201 0 (percent) [sources ]

• Renewabl e generatio n wil l als o increas e a s mor e o f th e technologie s becom e economica l i n ligh t of highe rfossil fue l prices
. Renewable s coul d captur e as muc h as a 22-percen t shar e o f th e generatio n marke

t b y 2020 , wit h mor

e tha n hal f supplie d b

ynonhydroelectri c renewabl e generatio n i n th e mor

e stringen t cases . Withi n th e energ yindustry , increase d employmen t i n th e natura l ga s an d renewable s industrie s coul d offset som e reduction s i n coa l employment
.
• Nuclea rgeneration' s declin e wil l slo w a s i t become s economica l unde r highe rcarbo n price s t o exten d th e operatin g live s o f existin g plants rathertha n retire them
.
• Petroleu m consumptio n wil l b e lowe rtha n expecte d i n th e reference cas e bu t wil l likel yremai n above curren t levels
. Althoug h petroleu m consumptio n i s lower , th e petroleu m shar e o f tota l energ yconsumptio n i s highe rtha n i n th e referenc e case , becaus e th e tota l i s lower
. Th e majorit yof petroleu m i s use d fo rtransportation , where there are limite d economicall yattractiv e option s fo rshiftin g t o les s carbon-intensive fuels
.
• Recyclin g carbo n revenue s bac k t o consumer

s wil l offse t som e of th e negativ e impacts o n th e economy . Th e econom ywil l continu e to grow ; however , th e growt h i n th e gros s domesti c produc t (GDP ) coul d b e lowe r tha n reference cas e level s durin g th e transitio n period
. As carbo n price s declin e an d th e econom yadjusts , GD P wil l reboun d b y202 0 t o abou t th e leve l i t woul d have bee n i n th e absence o f a carbo n reductio n progra m (Figure s 2 6 an d 27)
.
• Th e los s i n GDP , plu s th e fund s use d t o purchas e permits internationally , represents th e tota l cos t t o th e economy . Ove rth e firs t compliance r period , from 200 8 t o 2012 , th e tota l cos t range s fro m a n annua l averag e of $7 7 billio n (199 2 dollars ) t o almost fou rtime s tha t amount , dependin g o n th e require d carbo n reduction s an d ho w th e revenue s are recycle d t o th e economy . Thi s i s relativ e t o a tota l econom yo f $ 7 trillio n i n 1996 , whic h i s expecte d t o gro w t o $9. 5 trillio n i n 201 0 an d $1 1 trillio n i n 2020
. Figur e 26
. Annua l GD P growt h rate s i n fou rKyoto Protoco l analysi s cases . 2005-201 0 (percent ) [sources ! Figur e 27
. Annua l GD P growt h rate s i n fou rKyoto Protoco l analysi s cases . 2005-202 0 (percent ) [sources ] Sensitivity

Cases. Th e analysi s include s severa l sensitivit ycase s t o examin e factor s tha t ma yaffec t energ ydeman d an d carbo n emission s ove rth e nex t 2 0 years , includin g economi c growth , th e rate of improvemen t of technology , an d nuclea rpower . Wit h th e exceptio n o f th e nuclea rsensitivit ycase , th e sensitivit

y case s wer

e analyze d relativ e t o th e 1990+9 % case . Becaus e eac h o f th e sensitivit ycase s i s constraine d t o th e sam e leve l o f carbo n emission s a s th e cas e to whic h i t i s compared , th e primar yimpac t i s o n th e carbo n price require d t o mee t th e emission s target . 

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### Annua l energ y uutioo k

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• Macroeconomic

Growth. Th e assume d rat e of economi c growt h ha s a significan t impac

t o n projecte d energ ydeman d an d carbo n emissions
. Th e reference an d carbo n reductio n case s i n th e analysi s assum e a n averag e growt h rate o

f 1. 9 percen t a yea rbetwee n 199 6 an d 2020 , an d highe ran d lowe rgrowt h rate s o f 2. 4 an d 1. 3 percen t a yea rar e analyze d a s sensitivities
. Highe rgrowt h results i n highe rmanufacturin g outpu t an d income , increasin g th e deman d fo renerg yservice s an d resultin g i n highe renerg ydeman d an d carbo n emissions
. Convers e trend s hol d fo r th e lowe reconomi c growt h case .
• Becaus e highe rgrowt h increase s energ yconsumption , carbo n price s mus t b e highe rt o attai n a give n carbo n emission s target . I n th e hig h growt h case , th e carbo n price i n 201 0 i s $21 5 pe rmetri c ton , $5 2 pe r metri c to n highe rtha n th e referenc e cas e carbo n pric e o f $16 3 pe rmetri c to n (Figur e 28)
. I n th e lo

w growt h case , th e carbo n price i n 201 0 i s $12 8 pe rmetri c ton . Tota l energyconsumptio n i n 201 0 i s highe ran d lowe rb y 2. 2 quadrillio n Bt u wit h highe ran d lowe rgrowth , relative t o th e 1990+9 % cas e wit h reference economi c growth
. Figur e 28
. Projecte d carbo n price s i n fou rKyoto Protoco l sensitivit yanalysi s cases . 201 0 (199 6 dollars pe rmetri c ton ) [sources ]

• Technological

Progress. Hig h technolog yassumption s were develope d b ytechnolog yexperts fo rth e end-us e sectors—residential , commercial , industrial , an d transportation—considerin g th e potentia l impacts o f increase d researc h an d developmen t fo rmor e advance d technologie s •

• Th e revise d assumption s includ e earlie ryears o f introduction , lowe r costs , hig h maximu m market potential , an d highe refficiencie s tha n assume d i n th e reference case . Fo rth e electricitygeneratio n sector , th e cos t an d efficiencie s of advance d fossil-fire d an d renewabl e generatin g technologie s are assume d t o improve fro m referenc e cas e values
. Th e lo w technolog ycas e assume s tha t al l future equipmen t choice s are mad e fro m th e end-us e equipmen t availabl e i n 1998 , wit h buildin g shel l an d industria l plan t efficiencie s froze n a t 199 8 levels , an d n o ne

w advance d fossil-fire d generatin g technologie s are assumed
. Becaus e faste rtechnolog ydevelopmen t make s advance d energy efficien t an d low-carbo n technologie s mor e economicall yattractive , th e carbo n price s require d t o meet carbo n reductio n level s are significantl y reduced
. Conversely , slowe rtechnolog yimprovemen t require s highe r carbo n prices
. Wit h hig h technolog yassumptions , th e carbo n pric e i n 201 0 i s $12 1 pe rmetri c ton , compare d t o th e carbo n price o f $16 3 pe r metri c to n wit h th e reference technolog yassumptions
. Wit h th e lo w technolog yassumptions , th e carbo n pric e increase s t o $24 3 pe rmetri c to n i n 2010
.
• Nuclear

Power. I n th e reference case , nuclea rgeneratio n decline s becaus e 5 2 percen t of th e tota l nuclea rcapacit yavailabl e i n 199 6 i s retire d b y2020
. A numbe ro f unit s are retire d before th e en d o f thei r40 - yea roperatin g licenses , base d o n industr yannouncements an d analysi s of th e ag e an d operatin g cost s of th e units
. I n th e carbo n reductio n cases , lif e extensio n o

f th e plant s ca n occur , i f economical , an d there i s a n increasin g incentive t o invest i n nuclea rplan t refurbishmen t wit h highe rcarbo n prices ; however , thes e case s d o no t allo w th e constructio n of ne w nuclea rpowe rplants
. A nuclea rpowe rsensitivit ycas e examine s th e effect s of allowin g ne

w plants t o b e constructe d i f the yare economical
. Becaus e nuclea rplants stil l are no t competitive wit h fossi l an d renewabl e plants i n th e 1990+9 % case , thi s sensitivit ycas e i s analyze d agains t th e 1990-3 % case . I n additio n t o allowin g ne w nuclea r plants , th e highe rcost s assume d i n th e referenc e cas e fo rth e firs t few advance d nuclea rplants are reduce d i n thi s case . 

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### Annua l Energy Outlook

1999 - Issue s i

n Focu s Pag e 2 1 of 2 4

• Relativ e t o th e 1990-3 % case , 1 gigawat t of ne w nuclea rcapacit

yi s adde d b y201 0 i n th e nuclea rpowe rsensitivit ycase , an d 4 1 gigawatts , representin g abou t 6 8 ne

w plant s o f 60 0 megawatts each , ar e adde d b

y 2020
. Becaus e mos

t of th e impac

t from th e ne

w nuclea rplants come s afte rth e commitmen t perio d o f 2008 throug h 2012 , there i s littl e impac t o n carbo n price s an d energymarket s i n 2010
. B

y2020 , however , carbo n price s ar e $19 9 pe rmetri c to n wit h th e assumptio n o f ne w nuclea r plants , compare d t o $24 0 pe rmetri c to n i n th e 1990-3 % cas e wit h th e reference nuclea rassumptions
. Carbo n Emission s i n AE099 Reference

Case I n th e AE099

reference case , carbo n emission s fro m energ yconsumptio n are expecte d t o reac h 1,58

5 millio n metri c ton s i n 2000,1 8 percen t above th e 199 0 leve l of 1,34

6 millio n metri c tons . Th e projecte d emission s continu e t o ris e t o 1,790 millio n metri c ton s i n 201 0 an d 1,97 5 millio n metri c ton s i n 2020 , 3 3 percen t an d 4 7 percen t above th e 1990 levels , respectivel y(Figure 29)
. Tota l emission s increas e at a n averag e annua l rat e o f 1. 3 percen t betwee n 199 7 an d 2020 , an d pe rcapit a emission s als o increas e a t a n averag e rate o f 0. 4 percent . Throughou t th e projectio n period , carbo n emission s rise, becaus e continue d economi c growt h an d moderat e increase s i n energ yprice s are expecte d t o lead t o increasin g energ yconsumption
. Emission s ris e a t a faste rrat e tha n tota l energ yconsumption , whic h increase s at a n averag e annua l rat e o f 1. 1 percent , fo rtwo primar

yreasons . First , approximatel y5 1 percen t o f nuclea rgeneratin g capacity , whic h i s carbo n free , i s retire d b y202 0 an d n o new nuclea rplant s are constructed
. Second , moderat e increase s i n th e pric e o f natura l gas an d decrease s i n th e pric e of coa l lead t o slo w growt h i n renewables
. I n 2020 , electricit

ygeneratio n accounts fo r3 8 percen t o f al l carbo n emissions , increasin g from 3 6 percen t i n 1997
. Th e increasin g share o f carbo n emission s from generatio n results , i n part , from th e 1.4-percen t annua l growt h rate i n electricit yconsumption
. Of th e ne w capacit yrequire d t o meet electricit ydeman d growt h an d t o replace th e los s o f nuclea rcapacity , abou t 9 percen t i s fuele d wit h coa l an d 8 8 percen t wit h natura l gas . Figur e 29
. U.S
. carbo n emission s b ysecto ran d fuel
. 1990-202 0 (millio n metri c tons ) [sources ] Energyconsumptio n an d carbo n emission s fo rtransportatio n grow th e fastest o f al l th e end-us e sectors becaus e o f increase d trave l an d th e slow improvemen t i n fue l efficienc yi n th e reference case . Betwee n 199 7 an d 2020 , bot h transportatio n deman d an d emission s gro w a t a n averag e annua l rate o f 1. 7 percent , an d i n 202 0 th e transportatio n secto raccount s fo r35 percen t o f al l carbo n emissions
. Th e averag e efficienc yo f th e light-dut

yvehicl e fleet—cars, ligh t trucks , vans , an d sport-utilit yvehicles—increase s at a n averag e annua l rat e of onl y0. 2 percen t betwee n 1997 an d 2020
. Ove rth e sam e period , vehicle mile s travele d b

ylight-dut yvehicle s increas e b

y1. 6 percen t a year , fastertha n th e growt h rat e forth e over-age-1 6 populatio n (0. 9 percen t a year)
. Growt h i n bot h ai ran d freigh t travel , at averag e rates of 3. 8 percen t an d 1. 8 percen t a year , als o contribut e t o th e increas e i n emission s from th e transportatio n sector . Emission s fro m bot h th e residentia l an d commercia l sectors grow b y1. 2 percen t a year , contributin g 1 9 percen t an d 1 6 percen t o f carbo n emission s i n 202 0 (includin g emission s from th e generatio n o f electricit yuse d i n eac h sector)
. Continue d growt h i n energ yservice demand , particularl yi n electricity usin g equipmen t an d appliances , results i n th e emission s increases , offse t somewha t b yefficienc yimprovements i n bot h sectors . Industria l secto r emission s increas e b

yonl y0. 9 percen t a yea rthroug h 202 0 an d accoun t for3 0 percen t o f th e emission s i n 202 0 (includin g emission s from electricit y generatio n fo rth e sector)
. Th e relativel ylo w growt h rat e result s from efficienc y improvements an d a shift t o les s energy-intensive industries
. 

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### Annua l energ y uutioo K

1 yy y - issue s i n hocu s Page 2 2 of 2 4
B yfuel , petroleu m products ar e th e leadin g source o

f energy-relate d carbo n emission s becaus e of th e continuin g growt h o f th e transportatio n sector , whic h i s heavil ydependen t o n petroleum
. Abou t 42 percen t o f al l emissions , o r82 3 millio n metri c ton s o f th e tota l o f 1,97 5 millio n metri c ton s i n 2020 , are fro m petroleu m products , an d abou t 8 1 percen t o f th e petroleu m emission s ar e fro m transportatio n uses . Coa l i s th e secon d leadin g source of carbo n emission s a t abou t 34 percent , o r 67 6 millio n metri c tons , i n 2020
. Coa l ha s th e highest carbo n conten t of al l th e fossi l fuel s an d remain s th e predominan t source of electricit ygeneration
. B

y 2020 , th e shar

e of coal-fire d generation , excludin g cogeneration , decline s slightl yfrom it s 199 7 leve l of 5 6 percen t bu t stil l accounts fo r5 2 percen t of al l generation
. Abou t 9 0 percen t of coa l emission s i n 202 0 resul t from electricit y generation
. Natura l ga

s consumptio n fo rbot h electricit ygeneratio n an d direc

t en d use s grow s th e fastes t o f al l th e fossi l fuels—a t a rat e o f 1. 7 percen t a yea rthroug h 2020
. Natura l ga s has a relativel ylo w carbo n conten t relative t o othe rfossi l fuel s (onl yabou t hal f that o f coal) , an d thu s carbo n emission s fro m natura l ga s us e are projecte d t o b e jus t 47 5 millio n metri c ton s i n 2020 , abou t 2 4 percen t o f th e total
. Macroeconomic

Growth Th e assume d rate o f economi c growt h ha s a stron g impac

t o n th e projectio n of energ yconsumptio n and , therefore , carbo n emissions
. I n AE099, th e hig h economi c growt h cas e include s highe rgrowt h i n population , th e labo rforce , an d labo rproductivity , resultin g i n highe rindustria l output , lowe rinflation , an d lowe r interes t rates . A s a result , GD P increase s a t a n averag e rate of 2. 6 percen t a yea rfrom 199 7 t o 2020 , compare d wit h a growt h rate o f 2. 1 percen t a yea ri n th e reference case . Wit h highe rmacroeconomi c growth , energ ydeman d grow s faster, a s highe r manufacturin g outpu t an d highe rincom e increas e th e deman d fo renerg y services
. Tota l energ yconsumptio n i n th e hig h economi c growt h cas e i s 129. 4 quadrillio n Bt u i n 2020 , compare d wit h 119. 9 quadrillio n Bt u i n th e reference case . A s a resul t o f th e highe rconsumption , carbo n emission s are 2,12 4 millio n metri c tons , o r8 percen t highe rtha n th e referenc e cas e leve l o f 1,97 5 millio n metri c ton s i n 2020
. Assumption s o f lowe rgrowt h i n population , th e labo rforce , an d labo r productivit yresul t i n a n averag e annua l growt h rat e of 1. 5 percen t i n th e lo w economi c growt h cas e throug h 2020
. Wit h lowe reconomi c growth , energ y consumptio n i n 202 0 i s reduce d from 119. 9 quadrillio n Bt u t o 110. 5 quadrillio n Btu , an d carbo n emission s are 1,826 millio n metri c tons , o r8 percent , lowe r tha n i n th e referenc e case . Tota l energ yintensity , measure d a s primar yenerg yconsumptio n pe rdolla ro f GDP , improve s at a fasterrate i n th e highe reconomi c growt h case , partiall y offsettin g th e change s i n energ yconsumptio n cause d b yth e highe rgrowt h assumptions
. Wit h mor

e rapid growt h i n energ yconsumption , there i s greate r opportunit yt o tur n ove ran d improve th e stoc k o f energy-usin g technologies , increasin g th e overal l efficienc yo f th e capita l stock
. Aggregat e energ yintensit y i n th e hig h economi c growt h cas e decrease s at a rat e of 1. 2 percen t a yea rfrom 199 7 throug h 2020 , compare d wit h 1. 0 percen t i n th e reference cas e an d 0. 8 percen t i n tn e low economi c growt h case . Technology

Improvement Th e AE099

referenc e cas e include s continue d improvements i n technolog yfo r bot h energyconsumptio n an d production—improvements i n buildin g shel l efficiencie s fo rbot h ne

w an d existin g buildings ; efficienc yimprovements fo r ne w appliance s an d transportatio n vehicles ; productivit yimprovements fo rcoa l 

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### Annua l Energ y Outlook 1999 - Issue s i

n Focu s Pag e 2 3 o f 2 4 production ; an d improvement s i n th e exploratio n an d developmen t costs , findin g rates , an d succes s rate s fo roi l an d gas production
. As a resul t o f continue d improvements i n th e efficienc yof end-us e an d electricit ygeneratio n technologies , tota l energyintensit yi n th e reference cas e decline s a t a n averag e annua l rate of 1. 0 percen t betwee n 1997 an d 2020
. Th e projecte d declin e i n energyintensit yi s considerabl yles s tha n that experience d durin g th e 1970 s an d earl y1980s , whe n energ yintensit ydeclined , o n average , b

y2. 3 percen t a year . Approximatel yhal f of that declin e ca n b e attribute d t o structura l shift s i n th e economy—shifts t o servic e industrie s an d othe rles s energy-intensive industries ; however , th e rest resulte d fro m th e us e o f mor e energy-efficien t equipment
. Durin g thos e year s there wer

e period s of rapi d escalatio n i n energyprices , encouragin g som e of th e efficienc y improvements
. Then , as energyprice s moderated , th e improvemen t i n energ y intensit ymoderated
. Betwee n 1986 an d 1996 , energ yintensit ywas relativel y fla t Regulator yprogram s hav

e contribute d t o som e o f th e past improvements i n energyefficiency , includin g th e Corporate Averag e Fue l Economystandard s fo r light-dut yvehicle s an d standard s fo rmotor s an d energy-usin g equipmen t i n building s i n th e EnergyPolic yAc t of 199 2 an d th e Nationa l Appliance Energ y Conservatio n Ac

t of 1987
. I n keepin g wit h th e genera l practic e of incorporatin g onl ycurren t polic

yan d regulations , th e referenc e cas e o f AE099 assume s n o ne w efficienc

ystandards
. Onl ycurren t standard s o rapprove d ne w standard s wit h specifie d level s are included
. Technolog yimprovements i n energy-consumin g equipmen t coul d reduce energyconsumptio n an d energy-relate d carbo n emission s t o level s belo w thos e i n th e reference case . Conversely , slowe rimprovements coul d increas e bot h consumptio n an d emissions
. AE099 presents a rang e of alternative case s that var yke yassumption s abou t technolog yimprovemen t an d penetration
. I n th e end-us e deman d sectors , experts i n technolog yengineerin g were consulte d t o derive hig h technolog yassumptions , considerin g th e potentia l impacts of increase d researc h an d developmen t formor e advance d technologies
. Th e revise d assumption s include d earlie ryears of introduction , lowe rcosts , highe rmaximu m market potential , an d highe refficiencie s tha n i n th e reference case , i t i s possibl e tha t furthe rtechnolog yimprovements coul d occu ri f there were a ver

yaggressiv

e researc h an d developmen t effort Fo rth e electricit ygeneratio n sector , th e cost an d efficiencie s o f advance d fossil-fired generatin g technologie s were assume d t o improve from reference cas e value s [47\. Th e lo w technolog ycas e assume s that al l future equipmen t choice s ar e fro m th e equipmen t an d vehicle s availabl e i n 1999 , wit h ne w buildin g shel l an d industria l plan t efficiencie s frozen at 199 9 levels
. Ne w generatin g technologie s are assume d not t o improve ove rtime
. Aggregat e efficiencie s stil l improve ove r th e forecas t perio d a s ne w equipmen t i s chose n t o replac e olde rstoc k an d th e capita l stoc k

expands
. Also , buildin g shel l efficiencie s improve wit h pric e increases
. I n th e hig h technolog ycase , wit h th e hig h technolog yassumption s of al l fou r end-us e deman d sector

s an d th e electncit

ygeneratio n secto rcombined , aggregat e energ yintensit ydecline s a t a n averag e o f 1. 3 percen t a yea rfrom 199 7 t o 2020 , compare d wit h 1. 0 percen t a yea ri n th e reference cas e (Figure 30)
. I n th e 199 9 technolog ycase , th e averag e declin e i s onl y0. 8 percen t a yea r throug h 2020
. Tota l energ yconsumptio n increase s t o 111. 9 quadrillio n Bt u i n 202 0 i n th e hig h technolog ycase , compare d wit h 119. 9 quadrillio n Bt u i n th e reference cas e (Figur

e 31) , bu t increase s t o 126. 6 quadnllio n Bt u i n th e 199 9 technolog ycase . Figur e 30
. U.S
. energ yintensit yi n thre e cases . 1997-202 0 (thousan d Bt u pe r dolla rGDP ) [sources ] Figur e 31
. U.S
. energ yconsumptio n i n thre e cases . 1997-202 0 (guadrillio n Btu ) http://www.eia.doe.gov/oiaCaeo99/issues.htm l 1 /2/0 1 

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### Annua l energ y UUUOO K



### lyy y - issue s in hocu s hag e 2 4 o t 2 4 [sources ] Th e lowe renerg yconsumptio n i n th e hig h technolog ycas e lower s carbo n emission s fro m 1,97

5 millio n metri c ton s i n th e reference cas e i n 202 0 t o 1,84 8 millio n metri c ton s (Figur

e 32)
. I n th e 199 9 technolog ycase , emission s increas e t o 2,105 millio n metri c ton s i n 2020
. Abou t 30 percent , o r3 8 millio n metri c tons , o f th e reductio n i n carbo n emission s i n th e hig h technolog ycas e compare d t o th e reference cas e results fro m lowe relectricit ydeman d an d generation
. A n additiona l 5 1 millio n metri c ton s of th e reduction , o r4 0 percent , results from shift s t o mor

e efficien t o ralternative-fuele d vehicle s i n th e transportatio n sector . Figur e 32
. U.S
. carbo n emission s i n thre e cases . 1997-202 0 (millio n metri c tons ) fsources l Th e hig h technolog yassumption s themselve s d o no t guarante e acceptance an d penetratio n i n th e market
. Technologie s mus t stil l b e cost-effective a s judge d b y th e consumers , an d penetratio n ca n b e slowe d b yth e relative turnove rof th e capita l stock
. I n orde rt o encourag e mor e rapi d penetratio n o f advance d technologies , t o reduce energyconsumptio n o rcarbo n emissions , i t i s likel ythat eithe rmarket policie s (fo rexample , highe renerg yprices ) o rnon-market policie s (fo rexample , ne

w standards ) ma

yb e required
.
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y3,199 9 URL : http://www.eia.doe.gov/oiaf/aeo99/issues.htm l

Nee d Hel p Now ? Cal l th e Nationa l Energyinformatio n Cente r(NEIC ) (202 ) 586-880 0 9A M - 5P M easter n tim e Specialize d Service s from NEI C I f yo u ar e havin g technica l problem s wit h thi s site , pleas e contac t th e EI A Webmaste ra

t wmaster@eia.doe.go

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### Annua l Energy Outlook

1999 - Marke

t Tren d Pag e 1 of 2 

## Repor t Content s [Report* : DOE/EIA-038 3

(99) ] 

# Marke t Trend s

Economi c Activit y Internationa l

Oi l Market s Energ y

Deman d Electricit y Oi l &

Natura l Ga s Coa l Emission s Preface

•Administrator' s Messag e

•Overvie w

" Legislatio n & Regulation s

" Issue s i n Focu s

" Marke t Trend s

•Forecas t Comparison s

•Majo r Assumption s fo r th e Forecast s

' Mode l Result s (Appendi x Tables )

•Downloa d Repor t

•Acronym s

•Contact s 1 1 h e projection s i n AE099 ar e no t statement s o f wha t wil l happe n bu t o f wha t migh t happen , give n th e assumption s an d methodologie s used
. Th e projection s ar e business-as usua l tren d forecasts , give n know n technology , technologica l an d demographi c trends , an d curren t law s an d regulations
. Thus , the yprovid e a policy-neutra l referenc e cas e tha t ca n b e use d t o analyz e polic y initiatives
. EI A doe s no t propose , advocate , o rspeculat e o n futur e legislativ e an d regulatorychanges
. Al l law s ar e assume d t o remai n a s currentl yenacted ; however , th e impact s o f emergin g regulatorychanges , whe n defined , ar e reflected
. Becaus e energymarket s ar e complex , model s ar e simplifie d representation s o f energ yproductio n an d consumption , regulations , an d produceran d consume r behavior
. Projection s ar e highl ydependen t o n th e data , methodologies , mode l structures , an d assumption s use d i n thei rdevelopment
. Behaviora l characteristic s ar e indicativ e o f real-worl d tendencie s rathe rtha n representation s o f specifi c outcomes . Energ ymarke t projection s ar e subjec t t o muc h uncertainty
. Man yo f th e event s tha t shap e energ ymarket s ar e rando m an d canno t b e anticipated , includin g sever e weather , politica l disruptions , strikes , an d technologica l breakthroughs
. I n addition , futur e development s i n technologies , demographics , an d resource s canno t b e foresee n wit h an ydegre e o f certainty
. Man yke y uncertaintie s i n th e AE099 projection s ar e addresse d throug h alternativ e cases . EI A ha s endeavore d t o mak e thes e projection s a s objective , reliable , an d usefu l a s possible ; however , the y shoul d serv e a s a n adjunc t to , no t a substitut e for , analytica l processe s i n th e examinatio n o f polic yinitiatives
. Feedbac k 

## Relate d Link

s

•Assumption s t o th e AEQ9 9

' Interactiv e Dat a Querie s t o 

### http://www.eia.doe.gov/oiaCaeo99/mrktrend.htm l 1/2/0 1 

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### Annua l Energy Outloo

k 1999 - Marke

t Tren dPag e 2 of 2 th e AEQ99

' Supplementa l Dat

a t o th e AEQ99

* NEM S Conference

" T o Forecastin g Hom e Pag e

•EIA Homepag e

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Nee d Hel p Now

? Cal l th e Nationa l EnergyInformatio n Cente r(NEIC ) (202 ) 586-880 0 9A M - 5P M easter n tim e Specialize d Service s fro m NEI C I f yo u ar e havin g technica l problem s wit h thi s site , pleas e contac t th e EI A Webmaste rat wmaster@eia.dpe.go v



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### Annua l energ y uutioo K

iyy y - MarKe

t iren d- Economi c Activity & Internationa l Oil Mar. . Pag e 1 o f 5 

## Repor t Content s [Report#:DOE/EIA-038 3 (99) ] 

# Marke t Trend s - Ke yAssumption ; Trend s i n Economi c Activit y AE099 Project s Stron g Growt h fo r U.S . Gros s Domesti c Produc t Preface Figur e 33
. Averag e annua l rea l growt h rate s of economi c factors , 1997-202 0 (percent) [sources ]

• Administrator' s Messag e

" Overvie

w

" Legislatio n & Regulation s

•Issues i n Focu s

•Marke t Trend s

•Forecas

t Comparison s

" Majo r Assumption s fo r th e Forecasts Th e outpu t of th e Nation' s economy , measure d b ygros s domesti c produc

t (GDP) , i s projecte d t o increas e b y2. 1 percen t a yea rbetwee n 1997 an d 202 0 (wit h GD P base d o n 199

2 chain-weighte d dollars ) (Figure 33) , slightl yhighe r tha n th e 1.8-percen t growt h projecte d i n AE098 fo rth e sam e period
. Th e projecte d growt h rate fo rth e labo rforc e i s simila rt o las t year' s forecast throug h 2020 ; however , i n th e AE099 projection , productivit

ygrowt h i s 1. 3 percen t a year , u p fro m 1. 1 percen t a yea ri n AE098. Th e projecte d rat e o f growt h i n GD P slows i n th e latte rhal f o f th e forecast perio d as th e expansio n of th e labo rforc e slows , bu t increase s i n labo r productivit ymoderate th e effects of lowe rlabo rforc e growth
. Tota l populatio n growt h remain s fairl yconstan t afte r2000 ; th e slowin g growt h i n th e siz e o f th e labo rforc e results instea d from th e increasin g siz e o f th e populatio n ove r6 5 year s ol d afte r2000
. As mor

e peopl e retire from th e wor k force , an d as lif e expectanc

yrises, th e labo rforce participatio n rat e (labo rforc e divide d b yadul t population ) declines
. Thus , from 201 0 t o 2015 , labo rforc e growt h slows t o 0. 5 percent , an d from 201 5 t o 202 0 i t fall s t o 0. 3 percen t a year . Labo rforc e productivit ygrowth , however , remain s above 1 percen t a yea rthroughou t eac h o f th e 5-yea rperiods
. I n addition , th e labo rforc e participatio n rate—th e percentag e of th e populatio n ove r1 6 year s of ag e actuall yholdin g o rlookin g fo r employment—peak

s i n 200 7 an d the n begin s t o declin e a s "bab yboom " cohorts begi n t o retire
. Manufacturin g Productio n I s Expected T o Gro wb y 2 Percen t a Yea r

•Mode l Result

s (Appendi x Tables )

•Download Repor

t Acronym s

•Contacts

" Feedbac k Th e projecte d growt h rate fo rmanufacturin g productio n i s 2. 0 percen t a year , slightl ylowe rtha n th e 2.1-percen t annua l growt h projecte d fo rth e aggregat e economy . Energy-intensive industries , however , are projecte d t o gro w mor e slowl ytha n non-energy-intensive industrie s (1. 2 percen t an d 2. 3 percen t annua l growth , respectively) [48\, du e i n par t t o risin g rea l energ yprices
. Th e electroni c equipmen t an d industria l machiner ysectors lead th e expecte d growt h i n manufacturing , a s semiconductor s an d computer

s fin d broade r application s (Figur

e 34)
. Th e rubbe ran d miscellaneou s plasti c products secto r i s expecte d t o gro

w faste rtha n manufacturin g a s a whole , wit h plastics continuin g t o penetrat e ne w market s a s well
. Highe rgrowt h i s expecte d fo rth e wholesal e trad e an d service s sector s tha n fo rth e manufacturin g sector , a s i n las t year' s forecas t Figur e 34
. Sectora l compositio n o f GD P growth
. 1997-202 0 (percen t pe ryear ) fsources l 

### Relate d Link s Economi c Growt h Case s

http://www.eia.doe.gov/oiaCaeo99/economic.htm l 1/2/0 1 

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### Annua l Energ y uutioo K

1 yy y - Marke t

i ren d- Economi c Activity 6t Internationa l Oi l Mar. . Pag e 2 o f 5

" Assumption s t o th e AE09 9 Interactiv e Data Querie s t o th e AE09 9

" Supplementa l Dat

a t o th e AE09 9

•NEM S Conference Hig h an d Lo w Growt h Case s Sho w Effect s o f Economi c Assumption s To reflec t th e uncertaint

yi n forecast s o f economi c growth , AE099 include s hig h an d lo w economi c growt h case s i n additio n t o th e reference cas e (Figur e 35)
. Th e hig h an d lo

w growt h case s sho

w th e effect s of alternative growt h assumption s o n energymarkets
. Th e thre e economi c growt h case s ar e base d o n macroeconomi c forecasts prepare d b yDRI / McGraw-Hil l (DRI ) [49\. Th e DR I forecast use d i n generatin g th e AE099 reference cas e i s th e August 1998 tren d growt h scenario , adjuste d to incorporat e th e worl d oi l price assumption s use d i n th e AE099

reference case . Th e AE099 hig h an d lo

w economi c growt h case s are base d o n th e optimisti c an d pessimisti c growt h projection s prepare d b yDR I i n Februar y1998
. Wit h thes e change s incorporated , th e DR I projection s are use d as th e startin g poin t forth e macroeconomi c forecasts i n th e Nationa l EnergyModelin g Syste m (NEMS ) simulation s fo rAE099.

• T o Forecastin g Hom e Pag e Figur e 35
. Averag e annua l rea l growt h rate s o f economi c factors i n thre e cases . 1997-202 0 (percent ) [sources ]

• EIA Homepag e Th e hig h economi c growt h cas e incorporate s highe rgrowt h rate s fo rpopulation , labo rforce , an d labo rproductivity
. Wit h highe rproductivit ygains , inflatio n an d interes t rate s ar e lowe rtha n i n th e reference case , an d economi c outpu t grows b y2. 6 percen t a year . GD P pe rcapit a grows b y1. 6 percen t a year , compare d wit h 1. 3 percen t i n th e reference case . Th e low economi c growt h cas e assume s lowe rgrowt h rates fo rpopulation , labo rforce , an d productivity , resultin g i n highe rprices , highe rinterest rates, an d lowe rindustria l outpu t growth
. I n th e lo w growt h case , economi c outpu t increase s b y1. 5 percen t a yea rfrom 199 7 throug h 2020 , an d growt h i n GD P pe rcapit a slow s t o 0. 9 percen t a year . Long-Ter m Tren d Indicates Slowin g GD P Growt h Figur e 36
. Annua l GD P growt h rat e fo rth e precedin g 2 0 years . 1970-202 0 (percent ) [sources ] Figur e 36 shows th e tren d i n th e movin g 20-yea rannua l growt h rat e fo rGDP , includin g projection s fo rthre e AE099 cases . Th e valu e fo reac h yea ri s calculate d as th e annua l growt h rat e ove rth e precedin g 2 0 years . Th e 20-yea r averag e show

s majo rlong-ter m trend s i n GD P growt h b ysmoothin g mor

e volatil e year-to-yea rchange s (althoug h th e increas e show n fo r2000-200 2 reflect s th e slow an d negativ e growt h of 1980-1982)
. Th e overal l tren d i s downward , reflectin g lowe rrates of capita l accumulatio n durin g th e 1970 s an d 1980s , lowe rlabo rforce growt h rates, an d shift s i n th e demographi c makeu p of th e population
. I n addition , annua l GD P growt h ha s fluctuated considerabl y aroun d th e trend
. Th e hig h an d lo w growt h case s capture th e potentia l for differen t path s o f long-ter m outpu t growth
. On e reaso n forth e variabilit yof th e forecast s i s th e compositio n of economi c output , reflecte d b

ygrowt h rate s o f consumptio n an d investmen t relative t o th e overal l GD P growt h fo rth e aggregat e economy . I n th e referenc e case , consumptio n grows b

y2. 3 percen t a year , whil e investmen t grows at a robus t 3. 0 percent . I n th e hig h growt h case , growt h i n investmen t increase s t o 3. 8 percen t a year . Highe rinvestmen t rate s lea d t o fastercapita l accumulatio n an d highe rproductivit

ygains , which , couple d wit h highe rlabo rforc e growth , yiel d fasteraggregat e economi c growt h tha n i n th e referenc e case . I n th e lo w growt h case , annua l growt h i n investmen t expenditure s slows t o 2. 1 percent . Wit h th e labo rforc e als o growin g mor e slowly , aggregat e economi c growt h slows considerably
. Internationa l Oi l Market s Graduall y Risin g Oi l Prices Ar e Projecte d 

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### Ajuiua i energ y UUUOO K



### ivy y - iviarKe

i iren a- economi c Activity & . internationa l Oi l Mar. . Pag e 3 o f 5
Just as th e historica l recor d show s substantia l variabilit

yi n worl d oi l prices , there i s considerabl e uncertaint yabou t future prices
. Thre e AE099 case s wit h differen t pric e path s allo

w a n assessmen t of alternative views o n th e cours e o f future oi l price s (Figur

e 37)
. Fo rth e reference case , price s rise b yabou t 0. 9 percen t a year , reachin g $22.7 3 i n constan t 199 7 dollars i n 2020
. I n nomina l dollars , th e reference cas e price exceed s $4 3 i n 2020
. Th e lo w price cas e ha

s price s rising , afte rth e curren t pric e slump , t o $14.5 7 b

y200 5 an d remainin g a

t abou t that leve l ou t t o 2020
. Th e hig h price cas e has a price ris e o f abou t 2. 5 percen t a yea rou t t o 201 5 an d the n remain s at $29.3 5 ou t t o 2020
. Th e levelin g of f a t abou t $29.3 5 i n th e hig h pric e cas e i s du e t o th e market penetratio n of alternative energ ysupplie s tha t coul d becom e economicall yviabl e a t tha t price
. Figur e 37
. Worl d oi l price s i n thre e cases . 1970-202 0 (199 7 dollar s pe rbarrel ) [sources ] Al l thre e pric e case s ar

e simila rt o th e pric e projection s i n AE098 beyon d 2005 , reflectin g considerabl e optimis m abou t th e potentia l fo rworldwid e petroleu m supply , eve n i n th e fac e of th e substantia l expecte d increas e i n demand
. Productio n fro m countrie s outsid e OPE C i s expecte d t o sho w a steady increase , reachin g almost 4 7 millio n barrel s pe rda yb yth e tur n o

f th e centur

y an d increasin g graduall ythereafte rt o mor e tha n 5 5 millio n barrel s pe rda yb y 2020
. Tota l worldwid e deman d fo roi l i s expecte d t o reac h nearl y11 5 millio n barrel s pe rda yb y2020
. Developin g countrie s i n Asi a sho w th e largest growt h i n demand , averagin g almost 4 percen t a year . Outloo k fo r Worl d Oi l Supplies I s Optimisti c Figur e 38
. OPE C oi l productio n i n thre e cases . 1970-202 0 (millio n barrel s pe r day ) [sources ] Th e thre e price case s ar

e base d o n alternative assumption s abou t oi l productio n level s i n OPE C nations : highe rproductio n i n th e lo w price cas e an d lowe rproductio n i n th e hig h pric e case . Wit h it s vas t store of readil yaccessibl e oi l reserves , OPEC

—primaril yth e Persia n Gul f nations-n s expecte d t o b e th e principa l source o f margina l suppl yt o meet future incrementa l demand
. B y2000 , OPE C suppl yi n th e reference cas e i s ove r3 0 millio n barrel s pe rday , consisten t wit h announce d plan s forOPE C capacit yexpansio n [5QI

B y2020 , OPE C productio n i s almost 5 9 millio n barrel s pe rda y(almost twic e it s 199 7 production ) i n th e referenc e case , ove r5 1 millio n i n th e hig h case, , an d ove r7 1 millio n i n th e lo

w cas e (Figur

e 38)
. Worldwid e deman d foroi l varie s acros s th e price case s i n respons e t o th e price paths
. Tota l worl d deman d foroi l range s fro m 124. 4 millio n barrel s pe rda yi n th e low pric e cas e t o 109. 1 i n th e hig h pric e case . Thi s variatio n reflect s uncertaint yabou t th e prospect s fo rfuture productio n fro m th e Persia n Gul f region
. Th e expansio n o f productive capacit ywil l require majo r capita l investments , whic h coul d depen d o n th e availabilit yan d acceptabilit

yo f foreig n investments
. Ira q i s assume d t o continu e sellin g oi l onl yat sanction allowe d volume s fo rth e remainde ro f thi s decade
. Recen t discoverie s offshore o f Algeri a an d Nigeri a a s wel l as Venezuela' s aggressiv e capacit yexpansio n plan s wil l mor

e tha n accommodate increasin g deman d i n th e absence o f Iraq' s ful l retur n t o th e oi l market
. Continued Productio n Gain s Ar e See n fo r Non-OPE C Oi l Supplier s Figur e 39
. Non-OPE C oi l productio n i n thre e cases . 1970-202 0 (millio n barrel s pe rday ) [sources ] Th e growt h an d diversit

yi n non-OPE C oi l suppl yhav e show n surprisin g http://www.eia.doe.gov/oiaCaeo99/economic.htm l 1/2/0 1 "^.CiP.4 1



### Annual Energ y Outloo k

199 9 - Marke t

Iren d- Economi c Activity & Internationa l Oi l Mar. . Pag e 4 o f 5 resilience eve n i n th e lo

w pric e environmen t o

f thi s decade
. Althoug h OPE C producer s wil l certainl ybenefi t fro m th e projecte d growt h i n oi l demand , significan t competitio n i s expecte d fro m non-OPE C suppliers
. Countrie s i n th e Organizatio n fo rEconomi c Cooperatio n an d Developmen t (OECD ) that ar e expecte d t o registe rproductio n increase s ove rth e nex t decad e includ e Nort h Se a producers , Australia , Canada , an d Mexico
. I n Lati n America , Colombia , Brazil , an d Argentin a ar

e showin g accelerate d growt h i n oi l production , du e i n par t to privatizatio n efforts
. Deepwate rprojects of f th e coas t o

f wester n Africa an d i n th e Sout h Chin a Sea wil l star t producin g significan t volume s of oi l earl y i n th e nex t century . I n addition , muc h o f th e increas e i n non-OPE C suppl yove r th e nex t decad e i s expecte d t o com e fro m th e forme rSovie t Union , an d politica l uncertaint yappear s t o b e th e onl ypotentia l barrie rt o th e developmen t of vas t oi l resource s i n th e Caspia n Basin
. I n th e AE099

reference case , non-OPE C suppl yi s projecte d t o reac h almost 5 5 millio n barrel s pe rda

yb y201 0 an d remai n a

t abou t tha t leve l throug h 202 0 (Figur e 39)
. I n th e lo

w oi l pric e case , non-OPE C suppl ygrows t o les s tha n 53 millio n barrel s pe rda

yb y2020 , whereas i n th e hig h oi l pric e cas e i t reache s mor e tha n 5 7 millio n barrel s pe rda yb yth e en d of th e forecas t period
. Persia n Gul f Shar

e of Worl d Oi l Suppl y Increases i n Al l th e AE099 Cases Figur e 40
. Persia n Gul f share o f worldwid e oi l exports . 1965-202 0 (percent ) [sources ] Considerin g th e worl d market i n oi l exports , th e historica l pea k fo rPersia n Gul f exports (as a percen t of worl d oi l exports ) occurre d i n 1974 , whe n theymad e u p mor e tha n two-third s of th e oi l trade d i n worl d markets (Figure 40)
. Th e mos t recen t historica l lo

w fo rPersia n Gul f oi l exports cam e i n 1985 a s a resul t o f mor e tha n a decad e of hig h oi l prices , whic h le d t o significan t reduction s i n worldwid e petroleu m consumption
. Les s tha n 4 0 percen t o f th e oi l trade d i n 198 5 cam e from Persia n Gul f suppliers
. Followin g th e 198 5 oi l pric e collapse , th e Persia n Gul f expor

t percentag e ha

s bee n steadil yincreasing
. Fo rth e firs t tim e since th e earl y1980s , Persia n Gul f producer s are expecte d t o accoun t fo r mor e tha n 5 0 percen t o f worldwid e trade
. Thi s i s expecte d t o occu rbefor e th e en d of thi s decade
. I n th e reference case , th e Persia n Gul f shar e of tota l export s i s expecte d t o excee d 5 1 percen t shortl yafte rth e tur n of th e centur yan d graduall yincreas e t o ove r64 percen t b

yth e yea r2020
. I n th e AE099 lo w oi l pric e case , th e Persia n Gul f shar e o f worldwid e petroleu m exports i s expecte d t o reac h almost 5 2 percen t shortl yafte rth e tur n o f th e centur yan d steadil yincreas e t o almost 7 2 percen t b y2020
. Whil e al l Persia n Gul f producer s are expecte d t o increas e thei roi l productio n capacit ysignificantl yove rth e forecas t period , bot h Saud i Arabi a an d Ira q are expecte d t o mor e tha n doubl e thei rcurren t productio n capacit ylevels
.
' Crud e Oil , Ligh t Produc t Imports Are Expected T o Increas e Figur e 41
. U.S
. gros s petroleu m imports b ysource . 1997-202 0 (millio n barrel s pe rday) [sources ] I n th e reference case , tota l U.S
. gros s oi l imports increas e fro m 10. 2 millio n barrel s pe rda

yi n 199 7 t o 16. 3 millio n i n 202 0 (Figur e 41)
. Crud e oi l accounts fo rmos t o f th e increas e i n import s throug h 2000 , wherea s imports o f petroleu m products mak

e u p a large rshare of th e increas e afte r2000
. Produc t import s increas e mor

e rapidly , a s U.S
. productio n stabilize s an d U.S
. refinerie s lac k th e capacit yt o proces s a large rquantit yo f importe d crud e oil
. B y2010 , OPE C accounts fo rmor e tha n 4 5 percen t o f tota l projecte d U.S
. petroleu m imports
. Afte r2010 , th e OPE C shar e increase s gradually , t o mor e tha n 4 6 percen t i n 2020
. Th e Persia n Gul f shar e of U.S
. imports from OPE C increase s fro m abou t 3 9 percen t i n 199 7 t o almost 5 0 percen t i n 2020
. Crud e oi l imports from th e Nort h Se a increas e slightl ythroug h 2010 , the n leve l of f a s 

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### Annua l Energ y Outloo k

199 9 - Marke t

Tren d- Economi c Activity & Internationa l Oi l Mar. . Pag e 5 o f 5 Nort h Se a productio n ebbs
. Significan t imports o f petroleu m fro m Canad a an d Mexic o continue , an d Wes

t Coas t refiner s ar e expecte d t o impor

t crud e oi l fro m th e Fa rEas

t t o replace th e modes

t volume s o

f Alaska n crud e oi l tha

t wil l be exported
. Imports o f ligh t products ar

e expecte d to mor

e tha n doubl e b

y2020 , to nearl y 3. 0 millio n barrel s pe rday
. Mos t of th e projecte d increas e i s fro m refiner s i n th e Caribbea n Basi n an d th e Middl e East , wher e refinin g capacit

yi s expecte d t o expan d significantly
. Vigorou s growt h i n deman d fo rlighte rpetroleu m products i n developin g countrie s mean s that U.S
. refiner s ar e likel yt o impor

t smalle r volume s o

f light , low-sulfu rcrud e oils
. Refinin g Capacit

y I s Projected T

o Gro wWorldwid e Figur e 42
. Worldwid e refinin g capacit yb yregion
. 1997 an d 202 0 (millio n barrel s pe rday ) fsources l Worldwid e crud e oi l distillatio n capacit ywas 76. 1 millio n barrel s pe rda ya t th e beginnin g of 1997
. To mee t th e growt h i n internationa l oi l deman d i n th e reference case , worldwid e refinin g capacit yi s expecte d t o increas e b ymor e tha n two-thirds—t o mor

e tha n 127 millio n barrel s pe rday—b y2020
. Substantia l growt h i n distillatio n capacit yi s expecte d i n th e Middl e East , Centra l an d Sout h America , an d th e Asia/Pacifi c regio n (Figur e 42)
. Th e Asia/Pacifi c regio n ha s bee n th e fastest growin g refinin g cente ri n th e 1990s
. I t has recentl ypasse d Wester n Europ e a s th e world' s secon d largest refinin g cente rand , i n term s of distillatio n capacity , i s expecte d t o surpas s th e Unite d State s b

y2010
. Whil e no

t addin g significantl yt o thei rdistillatio n capacity , refiner

s i n th e Unite d State s an d Europ e hav e tende d t o improv

e produc t qualit yan d enhanc

e th e usefulnes s of heavie roil s throug h investmen t i n downstrea m capacity
. Futur e investments i n th e refiner yoperation s o f developin g countrie s mus t includ e configuration s that ar e mor e advance d tha n thos e currentl yi n operation
. Thei rrefinerie s wil l b e calle d upo n t o mee t increase d worldwid e deman d fo r lighte rproducts , t o upgrad e residua l fuel , t o suppl ytransportatio n fuel s wit h reduce d lead , an d t o suppl ybot h distillat e an d residua l fuel s wit h decrease d sulfu rlevels
. A n additiona l burde n o n ne w refinerie s wil l b e th e nee d t o suppl y lighte rproducts fro m crud e oil s whos e qualit yi s expecte d t o deteriorat e ove r th e forecas t period
.
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.

Fil e las t modified : Ma

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### Annua l Energ y Outloo k

1 yy y - Marke t

1 ren d, Energ y Deman d Pag e 1 o f 1 1 

# Marke t Trend s - Energ

yDeman d Report : Content i Primar yan d Delivere d Energ yUs e Sho w Simila rGrowt h Rate s [Report* : DOE/EIA-038 3 (") J Figur

e 43
. Primar

yan d delivere d energ yconsumption , excludin g transportatio n use . 1970-202 0 (quadrillio n Btu ) fsources l > Prefac e

* Administrator' s Messag e Ne t energydelivere d t o consumer s represents onl ya par

t o f tota l primar

y energ yconsumption
. Primar yconsumptio n include s energ ylosse s associate d wit h th e generation , transmission , an d distributio n o f electricity , whic h are allocate d t o th e end-us e sector s (residential , commercial , an d industrial ) i n proportio n to eac h sector' s shar e of electricit

yus e [51].

' Overvie

w

• Legislatio n & Regulation s

' Issues i n Focu s

" Marke t Trend s

" Forecas

t Comparison s Ho w energyconsumptio n i s measure d ha s becom e mor

e importan t ove rtime, a s reliance o n electricit

yha s expanded
. I n 1970 electricit yaccounte d fo ronl y 1 2 percen t o f energydelivere d t o th e end-us e sectors , excludin g transportation
. Since then , th e growt h i n electricit yus e fo rapplication s suc h a s space conditioning , consume rappliances , telecommunicatio n equipment , an d industria l machiner

yhas resulte d i n greate rdivergenc e betwee n tota l an d delivere d energyconsumptio n (Figur e 43)
. Thi s tren d i s expecte d t o stabiliz e ove rth e forecast horizon , as mor e efficien t generatin g technologie s offse t increase d deman d forelectricity
. Projecte d primar yenerg yconsumptio n an d delivere d energyconsumptio n grow b y0. 8 percen t an d 0. 9 percen t a year , respectively , excludin g transportatio n use . A t th e end-us e sectora l level , trackin g o f primar yenerg yconsumptio n i s necessar yt o lin k specifi c policie s wit h overal l goals
. Carbo n emissions , fo r example , ar

e closel ycorrelate d wit h tota l energyconsumption
. I n th e developmen t of carbo n stabilizatio n policies , growt h rate s fo rprimar yenerg y consumptio n ma

yb e mor e importan t tha n thos e fo rdelivere d energy .
• Majo r Assumption s fo r th e Forecasts

" Mode l Result

s (Appendi x Tables )

•Download Repor

t

•Acronym s



### • Contact

s Projected GD P Growt h Exceed s Growt h i n Energy Use

Figur e 44
. Energyus e pe rcapit a an d pe rdolla ro f gros s domesti c product , 1970-202 0 (index , 1970 = 1 ) [sources ] Energyintensity , bot h a s measure d b yprimar yenerg yconsumptio n pe rdolla r o f GD P an d a s measure d o n a pe rcapit a basis , decline d betwee n 197 0 an d th e mid-1980 s (Figur

e 44)
. Whil e th e overal l GDP-base d energ yintensit yo f th e econom yi s projecte d t o continu e declinin g betwee n 199 7 an d 2020 , th e declin e i s not expecte d t o b e a s rapi d a s i t wa s i n th e earlie rperiod , a s a resul t o f relativel ystabl e projecte d energ yprice s an d increase d us e of electricity-base d energ yservices
. A s electricit yclaim s a greate rshare o f energ yuse , projecte d consumptio n pe rdolla ro f GD P decline s at a slowe rrate, becaus e electricit y us e contribute s bot h end-us e consumptio n an d energ ylosse s t o tota l energ y consumption
. Betwee n 199 7 an d 2020 , GD P i s estimate d t o increas e b y6 1 percent , compare d wit h a 27-percen t increas e i n primar yenerg yuse .

• Feedbac k

r » t j f •*

i I n th e AE099 forecast , th e deman d fo renerg yservice s increase s markedl y ove rcurren t levels
. Th e averag e hom e i n 202 0 i s expecte d t o b e 4 percen t large ran d t o rel ymor

e heavil yo n electricity-base d technologies
. Annua l highwa ytrave l an d ai rtrave l pe rcapit a i n 202 0 are expecte d t o b e 2 0 an d 9 5 percen t higher , respectively , tha n thei rcurren t levels
. Growt h i n deman d fo r



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### Mimua i energ y UUUOOK

. 

### iyy y - iviarice

t iren a, Energ y Deman d Pag e 2 o f 

## •Keiate o ums

" Assumption s t o th e AE09 9

" Interactiv e Dat a Querie s t o th e AEQ9 9

• Supplementa l Dat a t o th e AE09 9 NEM S Conferenc e

• T o Forecastin g Hom e Pag e EI A Homepag e energ yservice s notwithstanding , primar yenerg yintensit

yo n a pe rcapita basi s wil l remai n essentiall ystati c throug h 2020 , wit h efficienc yimprovement

s i n man yend-us e energ yapplication s makin g i t possibl e t o provid e highe rlevel s o f servic e withou t significan t increase s i n energyus e pe rcapita
. Transportatio n Petroleu m Us e Lead s th e Ris e i n Energ yConsumptio n Figur e 45
. Primar

yenergyuse b

yfuel , 1970-202 0 (guadrillio n Btu ) [sources ] Petroleu m products , mainlyfo rtransportation , clai m th e greatest shar e of primar yenergyconsumptio n i n th e AE099 forecas t (Figur

e 45)
. Growt h i n energ ydeman d i n th e transportatio n sector , whic h average d 2. 0 percen t a yea r durin g th e 1970s , was diminishe d i n th e 1980s b yrisin g fue l price s an d b

yne w Federa l vehicl e efficienc

ystandards , whic h le d t o a n unprecedente d 2.1 - percen t annua l increas e i n averag e vehicl e fue l economy . I n th e AE099 forecast , fue l econom ygain s slo w a s a resul t of stabl e fue l price s an d th e absence o f ne

w legislative mandates
. A growin g populatio n an d increase d trave l pe rcapit a lead t o increase s i n deman d fo rgasolin e throughou t th e forecast
. Increase d competitio n an d technologica l advance s i n electricit ygeneratio n an d distributio n ar

e expecte d t o reduce th e rea l cos t o f electricity
. Despit e lo w projecte d prices , however , growt h i n electricit yus e i s slowe rtha n th e rapi d growt h see n i n th e 1970s
. End-us e deman d fo rnatura l ga s grow s at a slightl y slowe rrate tha n overal l energydemand , i n contras t to th e recen t tren d of mor e rapi d growt h i n th e us e o f gas a s th e industr ywa s deregulated
. Natura l ga s i s projecte d t o mee

t 19. 9 percen t o f al l end-us e energ ydeman d requirements i n 2020
. End-us e deman d fo rrenewabl e energ yfro m source s suc h as wood , woo d wastes , an d ethano l increase s b y1. 2 percen t a year . Th e us e o f geotherma l an d sola rtherma l energyi n building s increase s b yabou t 3. 6 percen t a yea rbu t doe s no t excee d 1 percen t of energ yconsumptio n fo rspace an d wate rheating
. Residentia l an d Commercia l Energ yUs e I s Expecte d T o Increas e Modestl y Figure 46
. Primar

yenergyus e b

ysector , 1970-202 0 (guadrillio n Btu ) fsources ] Primar yenerg yus e i n th e referenc e cas e i s projecte d t o reac h 12 0 quadrillio n Bt u b y2020,2 7 percen t highe rtha n th e 1997 level
. I n th e earl y1980s , a s energ yprice s rose , sectora l energ yconsumptio n gre w relativel ylittl e (Figur

e 46)
. Betwee n 1985 an d 1997 , however , stabl e energ yprice s contribute d t o a marke d increas e i n sectora l energ yconsumption
. I n th e forecast , energ ydeman d i n th e residentia l an d commercia l sector s grows at abou t th e sam e rat e a s population
. Deman d fo renergyi n th e transportatio n secto rgrows mor

e rapidly , drive n b

yestimate s o f increase d pe rcapit a trave l an d slowe rfue l efficienc

ygains
. Assume d efficienc ygain s i n th e industria l secto rare projecte d t o caus e th e deman d fo rprimar yenerg yt o grow mor

e slowl ytha n GDP
. To hel p bracket th e uncertaint yinheren t i n an ylong-ter m forecast , alternative assumption s were use d t o highligh t th e sensitivit yof th e AE099

forecas t t o differen t oi l price an d economi c growt h paths
. A t th e consume rlevel , oi l price s primaril yaffec

t th e deman d fo rtransportatio n fuels
. Oi l us e fortransportatio n i n th e hig h worl d oi l pric e cas e i s 4. 2 percen t lowe rtha n i n th e low worl d oi l pric e cas e i n 2020 , a s consume rchoice s favormor e fuel-efficien t vehicle s an d a slightl yreduce d deman d fo rtrave l services
. Varyin g economi c growt h affect s overal l energ ydeman d i n eac h o f th e end-us e sector s t o a greate rexten t [52]. B y2020 , hig h economi c growt h assumption s resul t i n a 17-percen t increas e i n tota l annua l energ yus e ove rit s projecte d leve l i n th e lo w growt h case . 

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### Annua l Jbnerg y uutioo k l yy y - Marke t 1 ren d, Energ y Deman dPage 3 of 1 1
Residentia l Secto rEnerg yDeman d Electricit yDominate

s th e Expected Increase i n Residentia l Energ yUs e Figur e 47
. Residentia l primar

yenergyconsumptio n b

yfuel , 1970-202 0 (percen t o f total ) [sources ] Residentia l energyconsumptio n i s projecte d t o increas e b ymor e tha n 2 0 percen t overal l betwee n 1997 an d 2020
. Mos t (8 7 percent) o f th e growt h i n tota l energ yus e i s relate d t o increase d us e of electricity
. Sustaine d growt h i n housin g i n th e South , wher e almost al l ne

w home s us e centra l ai rconditioning , i s a n importan t componen t of th e nationa l trend , alon g wit h th e penetratio n o f consume relectronics , suc h a s hom e offic e equipmen t an d securit ysystem s (Figur e 47)
. Whil e it s shar

e decline s slightly , natura l ga s us e i n th e residentia l secto ri s projecte d t o gro

w b y0. 6 percen t a yea rthroug h 2020
. Natura l ga s price s t o residentia l customer

s declin e i n th e forecas t an d are lowe rtha n th e price s of othe rfuels , suc h a

s heatin g oil
. Th e numbe rof home s heate d b ynatura l gas increase s mor

e tha n th e numbe rheate d b yelectricit yan d oil
. Distillat e fue l an d liquefie d petroleu m ga s (LPG ) us e are projecte d t o fall, wit h th e numbe rof home s usin g thes e fuel s fo rspace heatin g application s expecte d t o decreas e ove rtime
. Newl ybuil t homes are , o n average , large rtha n th e existin g stock , wit h correspondingl ygreate rneed s fo rheating , cooling , an d lighting
. Unde rcurren t buildin g code s an d appliance standards , however , energ yus e pe rsquar e foot i s typically lowe rfo rne

w constructio n tha n fo rth e existin g stock
. Furthe r reduction s i n residentia l energyus e pe rsquar e foot coul d resul t from additiona l gain s i n equipmen t efficienc yan d mor

e stringen t buildin g codes , requirin g mor e insulation , bette rwindows , an d mor e efficien t buildin g designs
. Efficienc y Improvement

s Coul d Slo

wth e Growt h i n Energy Us e fo r Heatin g Figur e 48
. Residentia l primar

yenerg yconsumptio n b

yen d use . 1990.1997
. 2010
. an d 202 0 (quadrillio n Btu ) [sources ] Energ yus e forspac

e heating , th e most energy-intensive en d us e i n th e residentia l sector , gre

w b y2. 5 percen t a yea rfrom 199 0 t o 199 7 (Figure 48)
. Futur e growt h shoul d b e slowe d b yhighe requipmen t efficienc yan d tighte r buildin g codes
. Buildin g shel l efficienc ygain s are projecte d t o cu t spac e heatin g deman d i n ne

w home s b

yove r2 5 percen t pe rhousehol d i n 202 0 relative t o th e deman d i n 1997
. A variet yof appliance s are no

w subjec t t o minimu m efficienc

ystandards , includin g hea

t pumps , ai rconditioners , furnaces , refrigerators , an d wate r heaters
. Curren t standard s fo ra typical residentia l refrigerato rlimi t electricit y us e t o 69 0 kilowatthour

s a year , an d revise d standard s are expecte d t o reduce consumptio n b

yanothe r3 0 percen t b

y2002
. Energyus e fo rrefrigeratio n has decline d b

y4. 4 percen t annuall ysinc e 199 0 an d i s projecte d t o declin e b y abou t 2. 0 percen t a yea rthroug h 2020 , a s older , les s efficien t refrigerator s are replace d wit h newe rmodels
. Th e "al l other " category , whic h include s smalle rappliance s suc h a s persona l computers , dishwashers , clothe s washers , an d dryers , has grow n b ymor e tha n 6 percen t a yea rsinc e 199 0 (Figure 48 ) an d no w account s fo r3 0 percen t o f residentia l energyuse . I t i s projecte d t o accoun t fo r4 0 percen t i n 2020 , a s smal l electri c appliance s continu e t o penetrat e th e market
. Th e promotio n of voluntar ystandards , bot h withi n an d outsid e th e applianc e industry , i s expecte d t o forestal l eve n large rincreases
. Eve n so , th e "al l other " categor yi s expecte d t o excee d othe rcomponents o f residentia l deman d b y2020
. 

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### Annua l Energy Outloo

k lyy y - Marke

t tren d, Energ

y Deman dPage 4 of 1 1 Highe rEfficiency , Lowe rEnerg yIntensit yAr e Expecte d fo r Appliance s Figur e 49
. Efficienc

yindicator

s fo rselecte d residentia l appliances
. 1998 an d 202 0 (index
. 1998 stoc k

efficienc y=1 ) fsources l Th e AE099

reference cas e projects a n increas e i n th e stoc k efficienc yo f residentia l appliances , as stoc k turnove ran d technolog yadvance s i n mos t end use service s combin e t o reduc e residentia l energ yintensit yove rtime
. Fo rmos

t appliance s covere d b

yth e Nationa l Appliance Energ yConservatio n Ac t o f 1987 , th e mos

t recen t Federa l efficienc

ystandard s are highe rtha n th e 1998 stock , ensurin g a n increas e i n stoc k efficienc y(Figure 49 ) withou t an y additiona l ne

w standards
. Futur

e update s t o th e Federa l standard s coul d hav e a significan t effec

t o n residentia l energ yconsumption , bu t the yar e no t include d i n th e reference case . Propose d rule s fo rne w efficienc

ystandard s fo rclothe s washer s an d wate rheater

s are expecte d t o b e announce d b yMarc h 1999 , an d severa l othe rproduc

t announcement

s ar e expecte d b

ysprin g 2000
. Fo ralmost al l end-us e services , technologie s no w exis t that ca n significantl y curtai l future energ ydeman d i f theyare purchase d b yconsumers . Th e mos

t efficien t technologie s ca n provid e significan t long-ru n saving s i n energ ybills , bu t thei rhighe rpurchas e cost s ten d t o restric t thei rmarket penetration
. Fo r example , condensin g technolog yfo rnatura l ga s furnaces , whic h reclaim s hea t from exhaus

t gases , ca n rais e efficienc yb ymor e tha n 2 0 percen t ove rth e curren t standard ; an d variable-spee d compressor s fo rai rconditioner

s an d refrigerator

s ca n increas e thei refficienc yb y5 0 percen t o rmore . I n contrast , there i s littl e roo m fo refficienc yimprovements i n electri c resistance wate r heaters , becaus e th e technolog yi s approachin g it s therma l limit
.

Commercia l Secto r Energ y Deman d Littl e Chang e I s Projected fo r Commercia l Energ y Fue l Mi x Figur e 50
. Commercia l nonrenewabl e primar yenerg yconsumptio n b

yfuel
. 1970-202 0 (percen t o f total ) fsources l Projecte d energ yus e trend s i n th e commercia l secto rsho w stabl e share s fo ral l fuels , wit h growt h i n overal l consumptio n slowin g from it s pac e ove rth e past two decade s (Figur

e 50)
. Slo w growt h (0. 7 percen t a year ) i s expecte d i n th e commercia l sector , fo rtw o reasons . Commercia l floorspac e i s projecte d t o grow b yonl y0. 8 percen t a yea rbetwee n 199 7 an d 2020 , compare d wit h a n averag e o f 1. 5 percen t a yea rove rth e past tw o decades
. Lowe rgrowt h i n floorspac e reflect s th e slowin g populatio n growt h expecte d afte r2000
. Additionally , energ y consumptio n pe rsquar

e foot i s projecte d t o declin e b y0. 1 percen t a year , a s a resul t of efficienc

ystandards , voluntar

ygovernmen t program s aime d a t improvin g efficiency , an d othe rtechnolog yimprovements
. Electricit yaccounts fornearl ythree-fourth s o f commercia l primar yenergy consumptio n throughou t th e forecast
. Expecte d efficienc ygain s i n electri c equipmen t ar

e offse t b ycontinuin g penetratio n o f ne w technologie s an d greate r us e o f offic e equipment
. Natura l ga s account s fo r2 2 percen t o f commercia l energ yconsumptio n i n 1997 an d maintain s tha t share throughou t th e forecast. Distillat e fue l oi l make s u p onl y3 percen t o f commercia l deman d i n 1997 , dow n from 6 percen t i n th e year s before deregulatio n o f th e natura l gas industry
. Th e fue l shar e projecte d fo rdistillat e drop s t o 2 percen t i n 2020 , as natura l ga s continue s t o compet e fo rspace an d wate rheatin g uses . Wit h stabl e price s projecte d forconventiona l fuels , n o appreciabl e growt h i n th e shar e o f renewabl e energ yi n th e commercia l secto ri s anticipated
. Ne wEnergy Use

s Lead Projecte d Growt h i n Commercia l Deman d Figur e 51
. Commercia l primar

yenerg yconsumptio n b

yen d use . 1997 an d 202 0 (guadrillio n Btu ) fsources l 

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### •rtjiuut u iiucig y v

. ULIOUK . 

### iyyy - mante l iren a, tnerg y ueman aPag e 5 o f 1 1 Throug h 2020 , lightin g remain s th e mos t importan t individua l en d us e i n th e commercia l secto r[53]. Energ yus e fo rlightin g decline s slightl yi n th e forecast as mor e energy-efficien t lightin g equipmen t an d mor e efficien t generatin g technologie s ar

e adopted
. Efficienc

yals o improve s fo rspace heating , spac e cooling , an d wate rheating , moderatin g th e growt h i n overal l commercia l secto r energydemand
. Increasin g buildin g shel l efficiency , whic h affects th e energy require d fo rspac

e heatin g an d cooling , contribute s t o th e tren d (Figur e 51)
. Th e highes

t growt h rate s ar

e expecte d fo ren d use s that hav e no t ye t saturate d th e commercia l market
. Energyus e fo rpersona l computer s grow s b y2. 7 percen t a yea ran d fo rothe roffic e equipment , suc h a s faxmachine s an d copiers , b yabou t 2. 1 percen t a year . Th e growt h i n electricit yus e fo roffice equipmen t reflects a tren d towar d mor e powerfu l equipment , th e respons e t o a projecte d declin e i n rea l electricit yprices , an d a n increas e i n th e market fo r commercia l electroni c equipment
. Natura l gas use fo rsuc h miscellaneou s use s as cooking , distric

t heating , an d self-generate d electricit yi s expecte d t o gro

w b y 1. 1 percen t a year . Ne

w telecommunication s technologie s an d medica l imagin g equipmen t increas e electricit ydeman d i n th e "al l othe rendus e category , whic h als o include s ventilation , refrigeration , mino rfue l consumption , service statio n equipment , an d vendin g machines
. Growt h i n th e "al l other " categor yi s expecte d t o slo

w somewha

t i n late ryear

s a s emergin g technologie s achiev e greate rmarket penetration
.



### Industria l Secto rEnerg yDeman d Increasin g Shar

e of Natura l Ga

s Us e I s Projecte d fo r Industr y Figur e 52
. Industria l primar

yenerg yconsumptio n b

yfuel
. 1970-202 0 (guadrillio n Bt u pe ryear

) fsources l Fro m 197 0 t o 1986 , wit h deman d fo rcokin g coa l reduce d b ydecline s i n stee l productio n an d natura l ga s use fallin g as a resul t o f end-us e restriction s an d curtailments , electricity' s shar e of industria l energ yus e increase d fro m 2 3 percen t t o 3 5 percent . Th e natura l ga s shar e fel l fro m 3 3 percen t t o 2 5 percent , an d coal' s shar

e fel l fro m 1 6 percen t t o 1 0 percent . Afte r1986 , natura l ga s bega n t o recove rits share as end-us e regulation s were lifte d an d supplie s becam e mor

e certai n an d les s costly
. Th e AE099 projection s o f plentifu l supplie s an d stabl e price s allow natura l gas t o increas e it s curren t shar e of industria l energ yconsumption
. Primar yenerg yus e i n th e industria l sector—whic h include s th e agriculture , mining , an d constructio n industrie s i n additio n t o traditiona l manufacturing— increase s b

y0. 8 percen t a yea ri n th e forecas t (Figure 52)
. Electricit y(fo r machin e drive an d som e productio n processes ) an d natura l gas (give n it s eas e of handling ) ar

e th e majo renerg ysource s forth e industria l sector . Industria l delivere d electricit

yus e i s projecte d t o increas e b y29. 8 percent , as Competitio n i n th e generatio n market keep s electricit yprice s low
. Relativel ylow price s are als o projecte d fo rnatura l gas , resultin g i n consumptio n tha t i s 26. 2 percen t ove r it s 1997 leve l b

y2020
. Industria l petroleu m us e grows b y23. 2 percen t ove rth e sam e period
. Coa l us e increase s slowly , b y0. 4 percen t a year , a s ne w steelmakin g technologie s continu e t o reduce deman d fo rmetallurgica l coal , offsettin g th e modes

t growt h i n coa l us e fo rboile rfue l an d a s a substitut e for coke i n traditiona l steelmaking
. Manufacturin g Hea

t an d Powe r Dominat

e Industria l Energy Us

e Figur e 53
. Industria l primar

yenerg yconsumptio n b

yindustr ycategory . 1990 - 202 0 (guadrillio n Bt u pe ryear ) fsources ] Mor e tha n two-third s o f al l th e energ yconsume d i n th e industria l secto ri s use d t o provid e hea

t an d powe rfo rmanufacturing ; th e remainde ri s approximatel y equall ydistribute d amon g nonmanufacturin g hea t an d powe ran d consumptio n a s feedstock

s (ra w materials ) an d othe rmiscellaneou s use s (Figur e 53)
. 

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### Annua l Energ y Outloo

k 1999 - Marke

t Tren d, Energ y Deman dPage 6 of
Petroleu m refining , chemicals , an d pul p an d pape rare th e largest end-us e consumer s o f energ yfo rhea

t an d powe ri n th e manufacturin g sector . Thes e thre e energy-intensive industrie s use d 8. 7 quadrillio n Bt u i n 1997
. Th e majo r fuel s used i n petroleu m refinerie s ar e stil l gas , natura l gas , an d petroleu m coke
. I n th e chemica l industry , natura l gas accounts fo rtwo-third s of th e energy consume d fo rhea

t an d power . Th e pul p an d pape rindustr yuse s th e mos

t renewables , i n th e for m o f wood an d spen t liquor
. A majo rus e o f energ yi n th e nonmanufacturin g industrie s i s fo rdiesel-powere d off-roa d equipment , suc h a s min e excavatio n equipment , farm tractors , an d bulldozers
. Th e constructio n industr yuse s asphal t an d roa d oi l fo rpavin g an d roofing
. B y2020 , nonmanufacturin g outpu t i s projecte d t o b e 40. 9 percen t highe ran d delivere d energyconsumptio n (includin g asphal t an d roa d oil ) 38. 3 percen t highe rtha n thei r199 7 levels
. Tota l feedstoc k

us e i s expecte d t o increas e b

y19. 8 percen t Natura l gas i s th e fastest growin g feedstock , increasin g b

y23. 4 percen t betwee n 1997 an d 2020
. Changin g Industria l Outpu t Lead s th e Declin e i n Energy Intensit y Figur e 54
. Industria l delivere d energyintensit yb ycomponent . 1990-202 0 (index
. 1997 = 1 ) fsources ] Change s i n industria l energyintensit y(consumptio n pe runi t o f output ) ca n b e separate d int o two effects
. On e componen t reflect s underlyin g increase s i n equipmen t an d productio n efficiencies ; th e othe rarise s from structura l change s i n th e compositio n o f manufacturin g output . Since 1970 , th e us e o f mor e energy-efficien t technologies , combine d wit h relativel ylo w growt h i n th e energy intensive industries , ha

s moderate d growt h i n industria l energ yconsumption
. Thus , despit e a 44percen t increas e i n industria l output , tota l energ yus e i n th e secto rha s grow n b yonl y1 2 percen t sinc e 1977
. Thes e basi c trend s ar e expecte d t o continue
. Th e shar e o f tota l industria l outpu t attribute d t o th e energy-intensive industrie s falls from 2 3 percen t t o 1 9 percen t from 199 7 t o 2020
. Thus , eve n i f n o specifi c industr yexperience d a declin e i n intensity , aggregat e industria l intensit ywoul d decline
. Figur

e 5 4 show

s projecte d change s i n energ yintensit ydu e t o structura l effects an d efficienc

yeffects separatel y[54]. Ove rth e forecas t period , industria l delivere d energ yintensit

ydrop s b y1 9 percent , an d th e changin g compositio n o f industria l outpu t alon e results i n approximatel ya 15-percen t drop
. Thus , mor e tha n two-third s o f th e chang e i n delivere d energ yintensit yforth e secto ri s attributabl e t o structura l shifts an d th e remainde rt o change s i n energ yintensit y associate d wit h increase s i n equipmen t an d productio n efficiencies
.

Transportatio n Secto r Energ y Deman d Lo wPrices Ar e Projected T o Boos t Gasolin e Consumptio n Figur e 55 . Transportatio n energ yconsumptio n b yfuel
. 1975.1997
. an d 202 0 (guadrillio n Btu ) fsources l B y2020 , tota l energ ydeman d fo rtransportatio n i s expecte d t o b e 36. 9 quadrillio n Btu , compare d wit h 25. 0 quadrillio n Bt u i n 199 7 (Figure 55)
. Petroleu m product s dominate energ yus e i n th e sector . Moto rgasolin e use , increasin g b

y1. 2 percen t a yea ri n th e referenc e case , make s u p mor e tha n hal f o f transportatio n energ ydemand
. Alternativ e fuel s are projecte d t o displac e abou t 500,00 0 barrel s of oi l equivalen t a da y[55] b y202 0 (abou t 5 percen t of light-dut yvehicl e fue l consumption) , i n respons e t o curren t environmenta l an d energ ylegislatio n intende d t o reduce oi l use . Gasoline' s share of deman d i s sustained , however , b

ylo w projecte d gasolin e price s an d slowe rfue l efficienc y gain s i n conventiona l light-dut yvehicle s (cars , vans , picku p trucks , an d utilit y vehicles ) tha n wa s achieve d durin g th e 1980s
. 

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### Annua l energ y WUUOOK



### iyy y - Marke t

iren a, tnerg y Deman dPag e 7 o f 1 1

Assume d industria l outpu t growt h o f 1. 9 percen t a yea rthroug h 202 0 lead s t o a n increas e i n freigh t transport , wit h a correspondin g increas e i n diese l us e o f 1. 5 percen t a year . Economi c growt h an d lo w projecte d je t fue l price s yiel d a 3.8-percen t annua l increas e i n ai rtravel , causin g je t fue l us e t o increas e b y2. 8 percen t a year . I n th e forecast , energ yprice s directl yaffec t th e leve l o f oi l us e throug h trave l cost s an d averag e vehicl e fue l efficiency
. Mos t o f th e projecte d pric e sensitivit y i s see n a s variation s i n moto rgasolin e us e i n light-dut yvehicles , becaus e th e stoc k o f light-dut yvehicle s turn s ove rmor e rapidl ytha n th e stoc k fo rothe r mode s o f travel
. I n th e hig h oi l pric e case , gasolin e us e increase s b yonl y1. 1 percen t a year , compare d wit h 1. 4 percen t a yea ri n th e lo w oi l pric e case . Fue l Efficienc y Grows , Despit e Increasin g Vehicl e Horsepowe r Figur e 56
. Transportatio n stoc k fue l efficiencyb vmode
. 1997-202 0 (index
. 199 7 = 1 ) fsources ] Projecte d fue l efficienc yimprove s a t a slowe rrat e throug h 202 0 tha n i n th e 1980 s (Figur e 56) , wit h light-dut yvehicl e efficienc ystandard s assume d t o sta y a t curren t levels
. Projecte d lo w fue l price s an d highe rpersona l incom e [__
. increas e th e deman d fo rlarger , mor e powerfu l vehicles
. Averag e horsepowe r fo rne w car s i n 202 0 i s 6 3 percen t abov e th e 199 7 leve l (Tabl e 3) , bu t th e us e o f advance d technologie s an d material s keep s ne w vehicl e fue l econom yfrom declining
. Ne w advance d technologies , suc h a s gasolin e fue l cell s an d direc t fue l injectio n an d electri c hybrid s fo rbot h gasolin e an d diese l engines , ar e projecte d t o boos t fue l econom ylevel s graduall ythroug h 2020 , b yabou t 1 t o 2 mile s pe rgallon
. Fro m 199 0 t o 1997 , th e horsepowe ro f compac t spor t utilit yvehicle s (mediu m ligh t trucks ) increase d faste rtha n tha t o f standar d spor t utilit yvehicle s (larg e ligh t trucks)—3. 0 percen t vs . 2. 6 percen t a year . I f i t continues , thi s tren d wil l lea d t o highe rhorsepowe rfo rmediu m tha n forlarg e ligh t truck s b y2020
. Tabl e 3 - Ne w ca ran d ligh t truc k horsepowe rrating s an d marke t shares
. 1990-202 0 fsources l Electri c Vehicle s Ar e Projecte d T o Gai n AF V Marke t Shar e Sale s o f alternative-fue l vehicle s (AFVs ) a s a resul t o f legislativ e mandate s a t th e Federa l level—unde rth e Energ yPolicyAc t o f 199 2 (EPACT)—an d a t th e Stat e level—unde rth e Lo w Emissio n Vehicl e Progra m (LEVP)—-ar e expecte d t o reac h abou t 0.6 4 millio n unit s i n 202 0 (Figur e 57)
. AF V acquisition s mandate d fo rfleets unde rEPACT , predominantl yfuele d b ycompresse d natura l ga s (CNG ) o rliquefie d petroleu m gas , represen t th e earlies t legislate d sales
. Vehicle s tha t us e gaseou s fuel s continu e t o captur e a larg e shar e o f th e AF V marke t throug h 202 0 (Tabl e 4)
. Figur e 57 . Alternative-fue l vehicl e sale s b vtyp e o f demand
. 1997-202 0 (thousan d vehicle s sold ) fsources l Implementatio n o f LEV P regulation s i s assumed t o begi n i n 200 3 forCalifornia , Massachusetts , an d Ne w York
. LEV P legislate d sale s ar e expecte d t o tota l 292,00 0 unit s i n 2020 , boostin g electri c vehicle s t o abou t 2 5 percen t o f AF V sales
. Market-drive n sale s [57] excee d mandate d sale s o f AFV s b y200 0 a s a resul t o f AF V corporat e averag e fue l econom y(CAFE ) credit s availabl e t o aut o manufacturer s unde rth e Alternativ e Moto rFuel s Act
. AFV s Ar e Projecte d a t 8 Percen t o f Al l Vehicl e Sale s i n 202 0 Figur e 58
. Alternative-fue l light-dut yvehicl e sale s b yfue l type , 1997-202 0 (thousan d vehicle s sold ) [sources ] 

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### Annua l Energ y Outlook 1999 - Marke

t Tren d, Energ y Deman dPag e 8 of 1 1
I n th e reference case , tota l AF V sale s reac h approximatel y1.2 1 millio n units , o r 8. 1 percen t o

f al l vehicl e sales , i n 202 0 (Figur e 58)
. Th e us e o

f light-dut yAFVs i s expecte d t o reduc

e carbo n emission s b

y1 millio n metri c ton s of carbo n b y 2020
. Vehicle s tha

t use gaseou s fuel s ar

e alread ybein g sol d b

ymanufacturer

s a t price s $3,00 0 t o $4,00 0 abov e thos e fo rgasolin e vehicles
. Thei rlimite d rang e (abou t two-third s that of gasolin e vehicles ) makes the m goo d candidate s fo rcentrall yfuele d flee t applications
. Becaus e th e larg e fue l tank s require d t o maintai n vehicl e rang e restric t bot h trun k

an d passenge rspace , th e market potentia l fo rgaseou s fue l AFVs fo rprivat e us e i s limite d t o large rvehicles
. Electri c vehicle s ar

e currentl ybein g develope d b ysevera l automobil e manufacturers , bu t larg e number s o f sale s are no

t expecte d unti l LEV P mandate s begin
. Sale s o f dedicate d electri c vehicles—9 8 percen t of whic h originat e fro m LEV P mandates—ar e projecte d t o reac h nearl y299,00 0 units i n 2020
. Tabl e 4 - Share s of th e alternative-fue l light-dut yvehicl e market b

vtechnolog y type. 202 0 (percent ) fsources l "Flexfuel " vehicles , whic h ca n us e an ycombinatio n of ethanol , methanol , an d gasoline , are expecte d t o mak e u p 2 3 percen t of AF

V sale s i n 2020
. Th e range , fue l efficiency , an d performance of thes e vehicle s ar e simila rt o thos e of conventiona l gasolin e vehicles , an d thei rincrementa l productio n cost i s currentl yles s tha n $500 , althoug h manufacturer s ar e no w sellin g the m a

t cos t t o mee t CAF E standards
. Cellulosi c ethano l i s expecte d t o displac e corn-base d ethano l b y2001 , resultin g i n lowe rfue l cost s fo rflex-fuel vehicles
. Energ y Deman d i n Alternativ e Technolog y Case s Ne wEfficien t Technologies Coul d Sav e Energy i n Al l Sectors Figur e 59
. Variatio n from reference cas e primar yenergyus e b

ysecto ri n two alternative technolog ycases . 2010.2015
. an d 202 0 (guadrillio n Btu ) fsources j Th e availabilit

yan d market penetratio n of new , mor e efficien t technologie s are uncertain
. Alternativ e case s fo reac h sector , base d o n a rang e of assumption s abou t technologica l progress , sho w th e effect s o f th e assumption s (Figur e 59)
. Th e alternative case s assum e that curren t equipmen t an d buildin g standard s ar e met bu t d o not includ e feedbac k effect s o n energ yprice s o ro n economi c growth
. Fo rth e residentia l an d commercia l sectors , th e 199 9 technolog ycas e hold s equipmen t an d buildin g shel l efficiencie s a t 199 9 levels
. Th e bes t availabl e technolog ycas e assume s tha t th e mos t energy-efficien t equipmen t an d best residentia l buildin g shell s availabl e are chose n fo rne w constructio n eac h yea r regardles s o f cost , an d that efficiencie s o f existin g residentia l an d al l commercia l buildin g shell s improve from thei rreference cas e levels
. Th e hig h technolog ycas e assume s earlie ravailability , lowe rcosts , an d highe r efficiencie s fo rmor

e advance d technologie s tha n i n th e referenc e case . Th e 199 9 technolog ycase s fo rth e industria l an d transportatio n sector s an d th e hig h technolog ycas e forth e industria l secto rus e th e sam e assumption s use d fo rth e building s sector . Th e hig h technolog ycas e fo rth e transportatio n secto r include s reduce d cost s fo radvance d technologie s an d improve d efficiencies , comparabl e t o thos e assume d i n a recen t Departmen t o f Energy(DOE ) interlaborator

ystud yfo rair , rail , marine , an d freigh t trave l an d provide d b yth e DO E Office o f EnergyEfficienc yan d Renewabl e Energ yan d America n Counci l fo ra n Energy-Efficien t Econom yfo rlight-dut yvehicle s [58]. Potentia l Efficienc

y Gain s Are Significan t fo r Residentia l User s Figur e 60
. Variatio n from referenc e cas e primar yresidentia l energ yus e i n thre e 

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### Annua l Energ y Outlook iy9 9 - Marke

t tren d, Energ

y Deman dPag e 9 of 1 1 alternative cases . 2000-202 0 (quadrillio n Btu ) [sources ] Th e AE099

reference cas e forecas t include s th e projecte d effect s of severa l differen t policie s aime d a

t increasin g residentia l end-us e efficiency
. Example s includ e minimu m efficienc ystandard s an d voluntar

yenergysaving s program s designe d t o promote energyefficienc ythroug h innovation s i n manufacturing , building , an d mortgag e financing
. I n th e 1999 technolog ycase , whic h assume s n o furthe rincrease s i n th e efficienc yo f equipmen t o rbuildin g shell s beyon d that availabl e i n 1999 , 7. 4 percen t mor e energywoul d be require d i n 202 0 (Figur e 60)
. I n th e bes t availabl e technolog ycase , assumin g that th e mos t energy-efficien t technolog yconsidere d i s alway s chose n regardles s o

f cost , energ yus e i s 25. 4 percen t lowe rtha n i n th e reference cas e i n 2020 , an d househol d primar y energ yuse i s 30. 5 percen t lowe rtha n i n th e 1999 technolog ycas e i n 2020
. Th e hig h technolog ycas e doe s not constrai n consume rchoices
. Instead , th e most energy-efficien t technologie s ar e assume d t o b e availabl e earlier , wit h lowe rcosts an d highe refficiencies
. Th e consume rdiscoun t rate s use d t o determin e th e purchase d efficienc yo f al l residentia l appliance s i n th e hig h technolog ycas e d o no

t var yfro m thos e use d i n th e reference case ; that is , consumer s valu e efficienc

yequall yacros s th e two cases . Energysaving s i n thi s cas e relative t o th e reference cas e reac h 10. 8 percen t i n 2020 ; however , th e saving s are not a s great a s thos e i n th e bes t availabl e technolog ycase . Investmen t Cost

s Coul d Outstri p Residentia l Energy Cos t Saving s Figur e 61
. Cos t an d investmen t change s fo rselecte d residentia l appliance s i n th e best availabl e technolog ycase . 2000-202 0 (billio n 1998 dollars ) fsources ] Figur e 62
. Presen t valu e o f investmen t an d saving s fo rresidentia l appliance s i n th e best availabl e technolog ycase . 2000-202 0 (billio n 1998 dollars ) fsources ] I n th e bes t availabl e technolog ycase , whic h require s th e purchas e of th e most efficien t equipmen t available , residentia l energyexpenditure s are lowe rbu t capita l investmen t cost s are highe r(Figure s 6 1 an d 62)
. Thi s cas e capture s th e effect s o f installin g th e most efficien t (usuall yth e most expensive ) equipmen t a t reference cas e turnove rrates , regardles s of economi c considerations
. A n incrementa l investmen t of $13 7 billio n [59] reduce s residentia l delivere d energ y us e b ymor e tha n 2 2 quadrillio n Btu—savin g consumer s mor e tha n $7 1 billio n i n energ yexpenditures—throug h 2020
. Wate rheatin g an d spac e conditionin g show th e greatest potentia l forsavings , bu t a t a substantia l investmen t cost . I n place o f conventiona l technologies , suc h a s electri c resistanc e wate rheaters , natura l gas an d electri c hea t pum p wate rheaters , an d horizontal-axi s washin g machine s ca n substantiall ycu t th e amoun t o f energ yneede d t o provid e hot wate rservices
. AE099 Referenc

e Case Include s Gain s i n Commercia l Energy Efficienc y Figure 63
. Variatio n fro m referenc e cas e primar ycommercia l energ yus e i n thre e alternative cases . 2000-202 0 (quadrillio n Btu ) fsources l Th e AE099

reference cas e incorporate s efficienc yimprovements fo r commercia l equipmen t an d buildin g shells , contributin g t o a declin e i n commercia l energ yintensit yo f 0. 1 percen t a yea rove rth e forecast
. Th e 199 9 technolog ycas e assume s tha t futur e equipmen t an d buildin g shell s wil l b e n o mor e efficien t tha n thos e availabl e i n 1999
. Th e hig h technolog ycas e assume s earlie ravailability , lowe rcosts , an d highe refficiencie s fo rmor e advance d equipmen t tha n i n th e referenc e case . I n addition , buildin g shell s are assume d t o improv e at a fasterrate the n i n th e reference case . I n comparison , th e best availabl e technolog ycas e assume s that onl yth e most efficien t technologie s considere d i n AE099

wil l b e chosen , regardles s o f cost , an d that buildin g shell s wil l improv

e at th e sam e rate assume d i n th e hig h technolog ycase . 

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### Annua l Energ y Outloo k

199 9 - Marke t

Tren d, Energ y Deman dPag e 1 0 o f Energyus e i n th e 199

9 technolog ycas e i s 2. 3 percen t highe rtha n i n th e reference cas e b

y202 0 (Figur

e 63) , wit h commercia l primar yenergyintensit

y stabl e throug h 2020
. I n th e hig h technolog ycas e ther e i s a n additiona l 3.0 - percen t energ ysaving s i n 2020 , an d primar yenergyintensit

yfall s b y0. 2 percen t a yea rfro m 1997 t o 2020
. Allowin g th e purchas e o f onl yth e mos

t efficien t equipmen t i n th e bes t availabl e technolog ycas e yield s energyus e tha t i s 11. 0 percen t lowe rtha n energ yus e i n th e reference cas e b y2020
. Commercia l primar

yenerg yintensit

ydecline s mor

e rapidl yi n thi s cas e tha n i n th e hig h technolog ycase , b y0. 6 percen t a year . Trend s i n Energy Intensit y Var y b y 5 0 Percen t i n Alternativ e Case s Figur e 64
. Industria l primar

yenergyintensit

yi n tw o alternative technolog y cases . 1990-202 0 (index
. 199 7 = 1 ) fsources l Projecte d efficienc

ygain s i n bot h energy-intensive an d non-energy-intensive industrie s provid e improvemen t i n energ yintensity
. Th e growt h i n machiner y an d equipmen t production , drive n primaril yb yinvestmen t an d export-relate d demand , i s a ke

yfactor: thes e les s energy-intensive industrie s gro w 4 8 percen t fastertha n th e industria l averag e (2. 8 percen t vs . 1. 9 percen t a year)
. I n th e hig h technolog ycase , 3. 4 quadrillio n Bt u les s energ yi s use d i n 202 0 tha n fo rth e sam e leve l of outpu t i n th e referenc e case . Industria l primar yenerg y intensit ydecline s b

y1.4 percen t a yea rthroug h 202 0 i n thi s case , compare d wit h a 1.0-percen t annua l declin e i n th e referenc e cas e (Figur e 64)
. Whil e th e individua l industr

yintensitie s declin e abou t twic e a s rapidly i n th e hig h technolog ycas e as i n th e reference case , th e aggregate intensit yfalls les s rapidly , becaus e th e compositio n of industria l outpu t i s th e sam e i n th e two cases . I n th e 199 9 technolog ycase , industr yconsume s 0. 9 quadrillio n Bt u mor e energ yi n 202 0 tha n i n th e reference case . Energyefficienc yremain s at th e leve l achieve d i n 1999 ne w plants , bu t averag e efficienc ystil l improve s a s ol d plants are retired
. Aggregat e industria l energ yintensit ydecline s b

y0. 9 percen t a yea rbecaus e of reduce d efficienc ygain s an d change s i n industria l structure . Th e compositio n o f industria l outpu t account s fo r8 6 percen t o f th e chang e i n aggregat e industria l energ yintensity , compare d wit h 7 7 percen t i n th e referenc e case . Mor e Improvemen t i n Fue l Efficienc y I s Possibl e fo r Transportatio n Uses Figur e 65
. Change s i n ke

ycomponents o f th e transportatio n secto ri n tw o alternative cases . 202 0 (percen t chang e from reference case ) fsources l Two alternative case s are examine d t o bracke t th e potentia l impacts o f technolog yimprovements i n th e transportatio n sector . Th e 199 9 technolog y cas e hold s ne

w fue l efficiencie s fo rlight-dut yvehicles , freight trucks , an d aircraf t at 199 9 level s throughou t th e forecast , resultin g i n averag e stoc k efficiencie s fo rlight-dut

yvehicle s that are a s muc h a s 8. 4 percen t lowe rtha n thos e i n th e reference cas e i n 2020
. A s a result , fue l us e i n 202 0 i s 2. 8 quadrillio n Bt u (7. 5 percent) highe rtha n i n th e reference cas e (Figur e 65)
. Th e increas e i n fue l us e i s attributabl e primaril yt o light-dut yvehicle s (5 5 percen t o f th e tota l increase) , followe d b yaircraf t (1 7 percent ) an d freight truck s (1 6 percent)
. Th e hig h technolog ycas e assume s cos t an d performance criteri a provide d b y th e DO E Offic e of EnergyEfficienc yan d Renewabl e Energyan d America n Counci l fo ra n Energy-Efficien t Econom yfo rlight-dut yvehicles , an d from th e efficienc ycas e o f th e recen t interlaborator ystud y[60]

fo rair , freight , marine , an d rail travel , includin g high-efficienc yadvance d light-dut

ydiese l vehicles ; electric , electri c hybrid , an d fue l cel l light-dut yvehicle s wit h highe refficiencie s an d earlie rintroductio n dates ; advance d dra g reduction , reduce d vehicl e weights , an d advance d diese l engine s fo rfreight trucks , wit h shorte rmarket 

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### Annua l Energ y Outloo k

199 9 - Marke t

Tren d, Energ y Deman d. Pag e 1 1 o f 1 1 penetratio n time s an d lowe rcost-effectivenes s criteria ; an d aircraf t wit h highe r fue l efficiency
. I n th e hig h technologycase , tota l fue l consumptio n fo rth e transportatio n secto ri s 2. 9 quadrillio n Bt u (7. 9 percent) lowe rtha n th e reference cas e leve l i n 2020
.
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### Annua l Energy Outlook

1999 - Marke

t Tren d- Oi l an dGa s Price s Page 1 of 1 0 

# Marke t Trend s -

Oi l 6 £ Natura l Ga

s Repor t Content s Oi l an d Ga s Price s [Report#:DOE/EIA-038 3

' '' Petroleu m Us e Grows , But Projected Price s Sho wOnl y Modes

t Increases

> Preface

•Administrator' s Messag e

" Overvie

w

•Legislatio n & Regulation s

•Issue s i n Focu s

" Marke t Trend s Becaus e domesti c price s fo rcrud e oi l ar e determine d largel yb

yth e internationa l market , th e curren t declin e i n worl d oi l price s cause s wellhea d price s fo rcrud e oi l i n th e lowe r4 8 State s t o dro p considerabl yi n 1998 i n al l cases , followe d b

ya n increas e throug h th e rest of th e forecast , regainin g 199 7 level s i n 200 3 i n th e reference case . Wellhead price s are projecte d t o fal l b y0. 7 percen t a yea rfrom 1997 t o 202 0 i n th e lo w worl d oi l pric e case , an d t o gro w b y 1. 3 an d 2. 4 percen t a yea ri n th e reference an d hig h price cases , respectivel y (Figur e 84)
. Figur e 84
. Lowe r4 8 crud e oi l wellhea d prices
. 1970-202 0 (199 7 dollar s pe r barrel ) fsources l U.S
. petroleu m consumptio n continue s t o ris e i n al l th e AE099 case s (Figur

e 85)
. Tota l petroleu m produc t supplie d ranges from 22. 5 millio n barrel s pe rda y i n th e lo w economi c growt h cas e t o 26. 8 millio n i n th e hig h growt h case , a s compare d wit h 18. 6 millio n i n 1997
. Figur e 85
. U.S
. petroleu m consumptio n i n five cases . 1970-202 0 (millio n barrel s pe rday ) [sources ]

• Forecas

t Comparison s

•Majo r Assumption s fo r th e Forecasts

" Mode l Results (Appendi x Tables )

•Download Repor

t

" Acronym s

•Contacts

" Feedbac k

_* « * Growin g Deman d Lead s t o Risin g Natura l Ga s Prices Wellhea d price s fo rnatura l ga s i n th e lowe r4 8 State s increas e b y0.1 , 0.8 , an d 1.4 percen t a yea ri n th e lo w economi c growth , reference , an d hig h economi c growt h cases , respectivel y(Figur e 86)
. Th e increase s reflec t rising deman d fo r natura l ga s an d it s impac

t o n th e natura l progressio n o f th e discover yproces s from large ran d mor

e profitabl e field s t o smaller , les s economica l ones . Price increase s als o reflec

t mor e productio n from highe rcos t sources , suc h a s unconventiona l ga s recovery . Lowe r4 8 unconventiona l ga s productio n grow s b y2. 7 percen t a yea ri n th e reference case , compare d wit h 2.2-percen t annua l growt h fo rconventiona l sources . Althoug h th e source s o f productio n change , technicall yrecoverabl e resource s (Tabl e 6 ) remai n mor e tha n adequate overal l t o mee t th e productio n increases
. Tabl e 6
. Technicall yrecoverabl e U.S
. oi l an d ga s resource s a s of Januar y1
. 199 7 fsources l Figur e 86
. Lowe r4 8 natura l ga s wellhea d prices
. 1970-202 0 (199 7 dollar s pe r thousan d cubi c feet ) fsources ] Deman d fo rnatura l ga s rise s i n al l thre e cases . I n th e lo w economi c growt h case , th e increas e i s gradual , an d th e price increase s attributabl e t o th e rising deman d are nearl yovershadowe d b yth e beneficia l impacts o f technologica l progres s o n th e discover

yprocess . I n th e reference an d hig h growt h cases , however , th e impacts o f technologica l progres s onl ymoderat e th e resultin g pric e increases
.



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### Annua l Energ y Outloo k

tyy y - Marke t

Iren d- Oil an d(ja s Price s Pag e 2 o f 1 0 

## Keiate d LIHK S

" Assumption s t o th e AEQ99 

### Oi l an d Ga s Reserv e Addition s Increased Drillin g Activit y I s Expected i n th e AE099 Projection s

" Interactiv

e Dat a Queries t o th e AEQ9 9

' Supplementa l Dat

a t o th e AEQ9 9 NEM S Conference

•T o Forecastin g Hom e Pag e

" EIA Homepag e Bot h explorator yan d developmenta l drillin g increas e i n th e forecas t Wit h risin g price s an d declinin g drillin g costs , crud e oi l an d natura l ga s wel l completion s increas e o n averag e b

y1.7 an d 3. 1 percen t a yea ri n th e lo w an d hig h oi l price cases , respectively , compare d wit h 2. 4 percen t i n th e reference cas e (Figur e 87)
. Change s i n worl d oi l price assumption s hav e a mor e pronounce d effec

t o n projecte d oi l drillin g tha n o n gas drillin g (Tabl e 7)
. Figur e 87
. Successfu l ne

w lowe r4 8 natura l ga s an d oi l well s i n thre e cases , 1970-202 0 (thousan d successfu l wells ) fsources ] Th e productivit

yo f natura l ga

s drillin g doe s not declin e as muc h as that o f oi l drilling , i n par

t becaus e tota l recoverabl e ga s resource s are mor e abundan t tha n oi l resources . A

t th e projecte d productio n levels , however , recoverabl e resource s o f conventiona l natura l ga s declin e rapidl yi n som e areas , particularl y i n th e onshor

e Southwes

t an d offshore Gul f o f Mexic o regions
. I n th e fina l analysis , th e future overal l productivit yof bot h oi l an d ga s drillin g i s necessaril y uncertain , give n th e uncertaint yassociate d wit h suc h factor s a s th e exten t o f th e Nation' s oi l an d ga

s resource s [62]. Tabl e 7 . Natura l ga s an d crud e oi l drillin g i n thre e cases . 1997-202 0 (thousand s of successfu l wells ) fsources ] Oi l Productio n I s Projected To Exceed Reserv e Addition s Fo rmos t o f th e pas

t tw o decades , lowe r4 8 productio n of bot h oi l an d natura l ga s has exceede d reserv e additions
. Th e recen t reversa l of that patter n fo r natura l gas i s projecte d t o continu e throug h 2013 , eve n wit h expecte d increase s i n demand , primaril yfo relectricit ygeneration
. Th e relativel yhig h level s o f annua l ga s reserve addition s throug h 202 0 reflec t increase d drillin g as a resul t o f highe rprices , a s wel l a s productivit

ygain s fro m technologica l improvements comparabl e t o thos e of recen t years , affectin g bot h exploratio n an d developmen t (Figur

e 88)
. Consequently , almos t 6 0 percen t o f th e lowe r4 8 nonassociate d natura l gas resource s expecte d t o b e technicall yrecoverabl e from conventiona l source s are projecte d t o b e discovere d b y2020
. I n contrast , despit e varyin g pattern s o f lowe r4 8 oi l reserv e addition s (Figure 89) , tota l lowe r 4 8 crud e oi l productio n exceed s tota l reserve addition s ove rth e forecast perio d i n al l cases . Figur e 88
. Lowe r4 8 natura l ga s reserve addition s i n thre e cases . 1970-202 0 (trillio n cubi c feet ) fsources l



### Natura l Ga

s Productio n an d Import s Mos t Natura l Ga

s Productio n I s Expecte d Fro m Conventiona l Sources Figure 89
. Lowe r4 8 crud e oi l reserv e addition s i n thre e cases . 1970-202 0 (billio n barrels ) fsources ] Th e continuin g increas e i n domesti c natura l ga s productio n i n th e forecas t come s primaril yfrom lowe r4 8 onshore nonassociate d (NA ) source s (Figur

e 90)
. Conventiona l onshor e production , whic h accounte d for39. 2 percen t of tota l U.S
. domesti c productio n i n 1997 , increase s i n share t o 45. 0 percen t o f th e tota l i n 2020
. Unconventiona l source s als o increas e i n share , an d ga s fro m offshore well s i n th e Gul f o f Mexic o contribute s significantl yt o production
. Th e innovative us e o f cost-savin g technolog yan d th e expecte d mid-ter m continuatio n of recen t hug e finds , particularl yi n th e dee p water s of th e Gul f o f Mexico , suppor

t thi s projection
. 

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### Annua l Energy Outlook

1999 - Marke

t Tren d- Oi l an dGa s Price s Pag e 3 of 1 0 Figur e 90
. Natura l gas productio n b ysource , 1970-202 0 (trillio n cubi c feet ) fsources ] Natura l gas productio n from Alask a grow s b y2. 3 percen t a yea ri n th e forecas t Currently , al l productio n i s eithe rconsume d i n th e State , reinjected , o rexporte d t o Japa n a

s liquefie d natura l ga

s (LNG)
. Alaska n ga s i s no t expecte d t o b e transporte d t o th e lowe r4 8 States , becaus e th e projecte d lowe r4 8 price s are not hig h enoug h i n th e forecast perio d t o suppor t th e require d transpor

t system . Expecte d Alaska n natura l gas productio n doe s no t includ e gas from th e Nort h Slope , whic h primaril yi s bein g reinjecte d t o suppor t oi l production
. I n th e future , Nort h Slop e gas ma

yb e markete d as LN G t o Pacifi c Ri m markets [63]. Productio n of associated/dissolve d (AD ) natura l ga s from lowe r4 8 crud e oi l reservoir s generall ydeclines , followin g th e expecte d patter n o f domesti c crud e oi l production
. A D ga s accounts fo r7. 6 percen t of tota l lowe r4 8 productio n i n 2020 , compare d wit h 13. 9 percen t i n 1997
. Ne t Import s o f Natura l Ga

s Ar e Projected T

o Increas e Ne t natura l gas imports are expecte d t o gro w i n th e forecas t (Figur

e 91 ) from 12. 9 percen t of tota l ga s consumptio n i n 199 7 t o 15. 5 percen t i n 2020
. Most of th e increas e i s attributabl e t o imports from Canada , whic h are projecte d t o gro w substantiall yas considerabl e ne w pipelin e capacit

ycome s o n line
. Whil e mos t of th e ne w capacit yprovide s acces s t o supplie s fro m wester n Canad a throug h th e Midwest , ne

w capacit yi s als o expecte d t o provid e acces s t o easter n supplies , includin g ga s from Sabl e Islan d i n th e offshore Atlanti c f64]
. Figur e 91
. Natura l ga s production , consumption , an d imports
. 1970-202 0 (trillio n cubi c feet ) fsources l Mexic o ha s a considerabl e natura l ga s resource base , bu t there i s uncertaint y a s t o whethe rit s indigenou s productio n ca n b e increase d sufficientl yt o satisf y risin g demand
. Since 1984 , U.S
. natura l ga s trad e wit h Mexic o has consiste d primaril yof exports . That tren d i s expecte d t o continu e throughou t th e forecast , wit h exports increasin g as mandate d conversio n of powe rplants fro m heav y fue l oi l t o natura l ga s gain s momentum , i n complianc e wit h Mexico' s ne w environmenta l regulations
. LN G provide s anothe rsource of ga s imports ; however , give n th e projecte d lo w natura l ga s price s i n th e lowe r4 8 markets , LN G i s no t expecte d t o grow beyon d a regionall ysignifican t source of U.S
. supply
. LN G import s into Everett , Massachusetts , an d Lak

e Charies , Louisiana , are projecte d t o increas e ove rth e forecas t reachin g a leve l o f 0.2 9 trillio n cubi c fee t i n 2020 , compare d wit h 0.02 trillio n cubi c fee t i n 199 7 [651
.



### Natura l Ga

s Consumptio n Natura l Gas Us

e Grow s Strongl y i n Al l th e AE099 Cases Natura l gas consumptio n increase s from 199 7 t o 202 0 i n al l th e AE099 case s (Figur e 92)
. Domesti c consumptio n range s fro m 29. 5 trillio n cubi c fee t pe ryea r i n th e lo w economi c growt h cas e t o 34. 8 trillio n i n th e hig h growt h cas e i n 2020 , a s compare d wit h 22. 0 trillio n cubi c fee t i n 1997
. Growt h i s see n i n al l end-us e sectors , wit h mor

e tha n hal f o f th e growt h resultin g from risin g deman d fo r electricity , includin g industria l cogeneration
. Figur e 92
. Natura l ga s consumptio n i n fiv e cases . 1970-202 0 (trillio n cubi c feet ) fsources ] Natura l ga s consumptio n i n th e electricit ygeneratio n secto r(excludin g cogeneration ) grow

s steadil ythroughou t th e forecas t I n th e reference cas e i t 

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### Annua l Energ y Outloo k

199 9 - Marke t

Tren d- Oi l an dGa s Price s Pag e 4 o f 1 0 nearl ytriples , fro m 3. 3 trillio n cubi c fee t a yea ri n 1997 t o 9. 2 trillio n cubi c fee t i n 2020
. Restructurin g o

f th e electri c utilit

yindustr yi s expecte d t o ope n u p ne w opportunitie s fo rgas-fire d generation
. I n addition , growt h i s spurre d b y increase d utilizatio n o

f existin g gas-fire d powe rplants i n th e forecast an d th e additio n o f ne w turbine s an d combined-cycl e facilities , whic h ar e les s capital intensiv e tha n coal , nuclear , o rrenewabl e electricit ygeneratio n plants
. Althoug h projecte d coa l price s t o th e electricit ygeneratio n secto rfal l throughou t th e forecast , th e natura l gas shar e o f ne w capacit yi s nearl y1 0 time s th e coa l share
. Lowe rcapita l costs an d projecte d improvements i n ga s turbin e hea

t rate s mak e th e overal l cos

t of gas-generate d electricit ype r kilowatthou rcompetitive wit h th e cost o f electricit yfro m ne w coal-burnin g generators . Risin g Ga

s Deman d I s Expected To Promp t Pipelin e Expansion s Deman d fo rnatura l ga

s i s projecte d t o outstri p existin g pipelin e capacity
. Expansio n of interstat e capacit y(Figur e 93 ) wil l b e neede d t o provid e acces s t o ne w supplie s an d t o serv

e expandin g markets
. Expansio n i s projecte d t o procee d at a rat e o f 1. 2 percen t a yea rthroug h th e forecast
. Th e greatest increase s ar

e projecte d alon g th e corridor s that mov

e Canadia n an d Gul f Coast supplie s t o markets i n th e easter n hal f of th e Unite d States
. Natura l gas deliverabilit

yi s als o augmente d b

yne w storag e capacit

ywhic h i s projecte d t o increas e i n mos

t region s ove rth e forecas t period
. I n severa l regions , growt h i n ne w pipelin e constructio n i s tempere d b yhighe rutilizatio n of existin g pipelin e capacit y(Figur e 94)
. Figur e 93
. Pipelin e capacit

yexpansio n b

yCensu s division
. 1997-202 0 (billio n cubi c fee t pe rday

) fsources ] Figur e 94
. Pipelin e capacit

yutilizatio n b

yCensu s division
. 199 7 an d 202 0 (percent) fsources ] 

### Natura l Ga s Price s Residential , Commercia l Ga s Prices Ar

e Projecte d T o Declin e Whil e consume rprice s t o th e industrial , electricity , an d transportatio n sector s generall yincreas e throughou t th e forecas t period , price s t o th e residentia l an d commercia l sector

s declin e (Figure 95)
. Th e decrease s reflec t declinin g distributio n margin s t o thes e sector s du e t o anticipate d efficienc yimprovements i n a n increasingl ycompetitive market
. I n th e industria l sector , a modes t decreas e i n margin s i s overshadowe d b ya n increas e i n wellhea d prices , an d th e overal l tren d i s a sligh t rise i n prices
. I n th e electricit ygeneratio n sector , increase s i n pipelin e margin s an d wellhea d price s combin e t o yiel d a n averag e 0.8-percen t annua l ris e i n end-us e prices
. Th e decline s i n th e residentia l an d commercia l sector

s overshado

w th e increase s i n othe rsectors , yieldin g a 0.3 - percen t dro p i n nationa l averag e end-us e prices
. Figur e 95
. Natura l gas end-us e price s b ysector . 1970-202 0 (199 7 dollar s pe r thousan d cubi c feet ) fsources l Compare d wit h thei rrise an d declin e ove rth e 1970199 7 period , transmissio n an d distributio n revenue s i n th e natura l ga s industr yare relativel ystabl e i n th e forecas t declinin g slightl ythroug h 2010 , whe n theybegi n a gradua l increas e (Tabl e 8)
. Decline s i n margin s are balance d b yhighe rvolumes
. Tabl e 8
. Transmissio n an d distributio n revenue s an d margins
. 1970-202 0 [sources ] Lowe r Distributio n Cost s Ar e Projecte d fo r Natura l Ga s Wit h distributio n margin s declining , th e wellhea d share s o f end-us e price s generall yincreas e i n th e forecas t (Figure 96)
. Th e greatest impac t i s i n th e 

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### Annua l Energ y uutioo k

1 yy y - Marke t

tren d- Oi l an dGa s Price s Pag e 5 o f 1 0 residentia l an d commercia l markets , wher e mos t customer

s purchas e gas throug h loca l distributio n companie s (LDCs)
. I n th e electricit ygeneratio n sector , whic h ha s a relativel ystabl e share , th e majorit yo f customer

s d o not purchas e fro m distributors
. Figur e 96
. Wellhead shar

e o f natura l gas end-us e price s b y sector . 1970-202 0 (percent) [sources ] Change s hav

e bee n see n historicall yi n al l components of end-us e price s (Tabl e 9)
. Pipelin e margin s decrease d betwee n 1985 an d 1997 wit h industr y restructuring
. O n average , modes t decrease s are projecte d t o continu e throug h th e forecast period , despit e th e cost o f interstat e pipelin e expansion
. Althoug h LD C margin s i n th e residentia l an d commercia l sector s hav e see n littl e o rn o decreas e since 1985 , efficienc yimprovements an d othe rimpacts o f restructurin g are exertin g downwar d pressur e o n distributio n costs , an d reduce d margin s ar

e projecte d fo rthes e sectors . Tabl e 9
. Component

s of residentia l an d commercia l natura l gas end-us e prices
. 1985-202 0 (199 7 dollar

s pe rthousan d cubi c feet ) [sources ] 

### Oi l an d Ga s Alternative Technology Case s Technolog yAdvance s Coul d Boos t Oi l an d Ga s Reserv e Addition s Figur e 97
. Lowe r4 8 crud e oi l an d natura l gas end-of-vea rreserve s i n thre e cases . 1997-202 0 (quadrillio n Btu ) fsources ] I n th e forecast , majo radvance s i n dat a acquisition , dat a processing , an d th e displa yan d integratio n o f seismi c dat e wit h othe rgeologi c data—combine d wit h lowe rcost compute rpowe ran d experienc e gaine d wit h ne w techniques

— continu e t o pu t downwar

d pressure o n cost s whil e significantl yimprovin g finding an d succes s rates . Effective us e of improve d exploratio n an d productio n technologie s t o ai d i n th e discover yan d developmen t of resources — particularly , unconventiona l gas an d offshore deepwate rfields—wil l b e neede d i f ne w reserve s are t o replace thos e deplete d b y production
. Alternative case s were use d t o asses s th e sensitivit yo f th e projection s t o change s i n succes s rates , exploratio n an d developmen t costs , an d finding rate s a s a resul t of technologica l progress . Th e assume d technolog yimprovemen t rate s wer e increase d an d decrease d b yapproximatel y5 0 percen t i n th e rapid an d slow technolog ycases , whic h were ru n a s full yintegrate d mode l runs . Al l othe rparameter

s i n th e mode l were kept a t thei rreferenc e cas e values , includin g technolog yparameter s fo rothe rmodules , parameter s affectin g foreig n oi l supply , an d assumption s abou t foreign natura l ga s trade
. Althoug h ga s reserve s becom e a slightl ylarge rshar e o f th e tota l i n th e reference case , tota l hydrocarbo n reserve addition s offse t production , keepin g tota l reserve s essentiall yconstan t throughou t th e projectio n perio d (Figur e 97)
. B y2020 , reserve s ar

e 16. 6 percen t highe ri n th e rapi d technolog ycas e tha n i n th e reference cas e an d 10. 9 percen t lowe ri n th e slow technolog ycase . Projected Ga

s Prices Strongl y Depen d o n Technolog y Assumption s Th e natura l gas pric e projection s are highl ysensitiv e t o change s i n th e assumption s abou t technologica l progres s (Figure 98)
. Lowe r4 8 wellhea d price s increas e at a n averag e annua l rate o f 1. 3 percen t i n th e slow technolog y case , compare d wit h onl y0. 8 percen t i n th e referenc e case , ove rth e projectio n period
. I n th e rapid technolog ycase , averag e natura l ga s wellhea d price s ar e highe rtha n th e 199 7 leve l b yat mos t 3. 5 percent , an d b

y202 0 theyare bac k

t o th e 1997 price o f $2.2 3 pe rthousan d cubi c feet
. Figur e 98
. Lowe r4 8 natura l ga s wellhea d price s i n thre e cases . 1970-202 0 (199 7 dollar

s pe rthousan d cubi c feet ) fsources l 

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### Annua l Energ y Outloo k

199 9 - Marke t

Tren d- Oi l an dGa s Price s Pag e 6 o f 1 0 Throug h 2000 , bot h price an d productio n level s fo rlowe r4 8 oi l an d natura l ga s ar e almos t identica l i n th e referenc

e cas e an d th e two technologica l progres s cases . B y2020 , however , natura l ga s price s ar

e 11. 6 percen t highe r(a

t $2.9 9 pe rthousan d cubi c feet) i n th e slo w technolog ycas e an d 16. 8 percen t lowe r(a t $2.2 3 pe rthousan d cubi c feet) i n th e rapi d technolog ycas e tha n i n th e reference cas e ($2.6 8 pe rthousan d cubi c feet)
. Unlik e natura l gas , lowe r4 8 averag e wellhea d price s fo rcrud e oi l d o no t var y significantl yacros s th e technologycases . I n 2020 , crud e oi l price s ar e 2 5 cents lowe ri n th e rapi d technolog ycas e an d 6 cents highe ri n th e slo w technolog y cas e tha n th e reference cas e price o f $21.7 3 pe rbarrel
. Domesti c oi l price s ar e determine d largel yb

yth e internationa l market ; change s i n U.S
. oi l productio n d o no t constitut e a significan t volum e relative t o th e globa l market
. Technolog y Progress Coul d Boos t Natura l Ga

s Marke t Shar e Change s i n productio n i n th e alternative technolog ycase s reflec t th e benefits o

f lowe rcost s an d highe rfinding rates fo rconventionall yrecoverabl e gas , a s wel l as a n arra yo f technologica l enhancements fo runconventiona l ga s recovery . Th e change s i n suppl ylead t o price change s that affec t ne w investmen t i n al l types of gas-fire d technologies , especiall yi n th e industria l an d electricit y generatio n sectors . Rapi d technolog yimprovements yiel d benefit s i n th e for m o f bot h lowe rprice s an d increase d productio n t o meet highe rconsumptio n requirements (Figur

e 99)
. Figur e 99
. Lowe r4 8 natura l gas productio n i n thre e cases . 1997-202 0 (trillio n cubi c feet) fsources l I n th e rapid technolog ycase/th e natura l gas shar e o f fossi l fue l inputs t o electricit ygeneratio n facilitie s i n 202 0 i s 24. 6 percent , compare d wit h 22. 2 percen t i n th e slow technolog ycase . Th e highe rleve l of ga s consumptio n come s largel ya t th e expens e o f coal
. There i s littl e additiona l displacemen t o f petroleu m product s i n th e rapid technolog ycase , becaus e natura l ga s capture s th e bul k of th e dual-fire d boile rmarket i n th e referenc e case . I n contrast , i n th e slo w technolog ycase , natura l ga s lose s market share t o bot h coa l an d petroleu m product s i n th e electricit ygeneratio n sector . Productio n from unconventiona l gas resource s (tigh t sands , shales , an d coalbeds ) i s particularl yresponsiv e t o change s i n th e assume d level s o f technologica l progress . I n th e rapid technolog ycase , th e unconventiona l ga s shar e of tota l lowe r4 8 natura l gas productio n i n 202 0 i s projecte d t o b e 33. 5 percen t compare d wit h 25. 2 percen t i n th e reference cas e an d 19. 3 percen t i n th e slo w technolog ycase . Oi l Productio n Show

s Less Chang e Wit h Technolog y Assumption s Th e projection s fo rdomesti c oi l productio n als o are sensitiv e t o change s i n th e technologica l progres s assumption s (Figur e 100)
. I n compariso n wit h th e projecte d lowe r4 8 productio n leve l of 4. 5 millio n barrel s pe rda yi n 202 0 i n th e reference case , oi l productio n increase s t o 5. 2 millio n barrel s pe rda yi n th e rapi d technolog ycas e an d decrease s t o 4. 6 millio n i n th e slow technolog ycase . Figur e 100
. Lowe r4 8 crud e oi l productio n i n thre e cases . 1997-202 0 (millio n barrel s pe rday) fsources ] Give n th e assumptio n that change s i n th e level s of technolog yaffec t onl yU.S
. oi l producers , tota l oi l suppl yadjust s t o th e variation s i n technologica l progres s assumption s primaril ythroug h change s i n imports of crud e oi l an d othe r petroleu m products
. Net imports rang e from a low o f 11. 7 millio n barrel s pe rda y i n th e rapi d technolog ycas e t o a hig h o f 12. 4 millio n barrel s pe rda yi n th e slo

w technolog ycase . 

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### Annua l Energ y Outloo k

199 9 - Marke t

Tren d- Oi l an dGa s Price s Pag e 7 o f 1 0
Globa l trad e i n natura l gas ha s no t grow n t o th e sam e exten t as petroleu m trade
. Becaus e opportunitie s fo rga s trad e betwee n th e Unite d State s an d countrie s outsid e Nort h America ar e limited , change s i n U.S
. gas productio n ar e determine d mor

e b yth e market condition s i n Nort h America tha n b yth e internationa l market
. 

### Oi l Productio n and Consumptio n Continue d Declin e I s Projecte d fo r Conventiona l Oi l Productio n Projecte d domesti c crud e oi l productio n continue s its histori c declin e throughou t th e forecast (Figur

e 101) , declinin g b

y1. 1 percen t a year , from 6. 5 millio n barrel s pe rda

yi n 1997 t o 5. 0 millio n barrel s pe rda yi n 202 0 [66], Conventiona l onshor e productio n i n th e lowe r4 8 States , whic h accounte d fo r49. 1 percen t o f tota l U.S
. crud e oi l productio n i n 1997 , i s als o projecte d t o decreas e a t a n averag e annua l rat e o f 0. 9 percen t ove rth e forecast
. Figur e 101
. Crud e oi l productio n b ysource . 1970-202 0 (millio n barrel s pe rday ) [sources ] Crud e oi l productio n from Alask a i s expecte d t o declin e at a n averag e annua l rat e of 4. 1 percen t betwee n 199 7 an d 2020
. Th e overal l decreas e i n Alaska' s oi l productio n result s from a continuin g declin e i n productio n from most o f it s oi l fields and , i n particular , fro m Prudho e Bay , th e larges t producin g field , whic h historicall yha

s accounte d fo rmor

e tha n 6 0 percen t of tota l Alaska n production
. Offshor e productio n generall yincrease s i n th e forecas t throug h 200 8 an d the n drop s belo

w curren t level s i n 2020 , resultin g i n a n overal l decreas e of 0. 7 percen t a year . Technologica l advance s an d lowe rcost s fo rdee p exploratio n an d productio n i n th e Gul f of Mexic o contribut e t o th e increas e i n th e earl yyear

s o f th e forecas t Productio n from enhance d oi l recover y(EOR ) [67], whic h become s les s profitabl e a s oi l price s fall, slows throug h 200 3 an d the n increase s alon g wit h worl d oi l price s throug h th e remainde rof th e forecast
. Declinin g Domesti c Oi l Suppl y Lead s t o Growin g Imports Domesti c petroleu m suppl ydecline s i n al l th e AE099 case s (Figur

e 102) , a s U.S
. crud e oi l productio n falls off
. I n th e lo w pric e case , domesti c suppl ydrop s from it s 199 7 leve l o f 9. 4 millio n barrel s pe rda yt o 7. 6 millio n barrel s pe rda yi n 2020
. I n th e hig h pric e case , domesti c suppl ydecline s onl yslightly , t o 9. 3 millio n barrel s pe rda

yi n 2020
. Figur e 102
. Petroleu m supply , consumption , an d imports
. 1970-202 0 (millio n barrel s pe rday

) fsources l Th e greatest variatio n i n petroleu m consumptio n level s i s see n acros s th e economi c growt h cases , wit h a n increas e o f 8. 2 millio n barrel s pe rda yove rth e 199 7 leve l i n th e hig h growt h case , compare d wit h a n increas e o f onl y3. 9 millio n barrel s pe rda

yi n th e lo w growt h case . Additiona l petroleu m imports wil l b e neede d t o fil l th e widenin g ga p betwee n suppl yan d consumption
. Th e greatest ga p betwee n suppl yan d consumptio n i s see n i n th e low wori d oi l pric e cas e an d th e smalles t i n th e low economi c growt h case . Th e projection s fo rnet petroleu m imports i n 202 0 range fro m a hig h of 18. 4 millio n barrel s pe rda yi n th e lo w oi l pric e case—mor

e tha n doubl e th e 199 7 leve l of 9. 2 millio n barrel s pe rday—to a low o f 14. 3 millio n barrel s pe rda y i n th e lo w growt h case . Th e valu e o f petroleu m import s i n 202 0 range s fro m $99. 7 billio n i n th e lo

w pric e cas e t o $158. 1 billio n i n th e hig h pric e case . Tota l annua l U.S
. expenditure s forpetroleu m imports , whic h reache d a historica l 

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### Annual Energ y Outloo k

199 9 - Marke t

Tren d- Oi l an dGa s Price s Pag e 8 o f 1 0 pea k o f $14 0 billio n (i n 1997 dollars ) i n 1980 [68], wer e $60. 9 billio n i n 1997
. 

### Petroleu m Import s an d Refinin g Import s Ar e Projecte d T o Mee t Abou t Two-Third s o f U.S
. Oi l Deman d I n 1997 , net import

s o f petroleu m climbe d t o a recor d 4 9 percen t o

f domesti c petroleu m consumption
. Continue d dependence o n petroleu m imports i s projected , reachin g 65 percen t i n 202 0 i n th e reference cas e (Figur e 103)
. Th e correspondin g impor

t share s of tota l consumptio n i n 202 0 ar e 6 1 percen t i n th e hig h oi l price cas e an d 7 1 percen t i n th e lo w price case . Figur e 103
. Shar

e of U.S
. petroleu m consumptio n supplie d b ynet imports
. 1970-202 0 (percent) fsources ] Althoug h crud e oi l i s expecte d t o continu e as th e majo rcomponen t o f petroleu m imports , refine d products represen t a growin g share
. Mor e imports wil l b e neede d as growt h i n deman d fo rrefine d products exceed s th e expansio n of domesti c refinin g capacity
. Refine d products mak e u p 2 0 percen t of net petroleu m imports i n 202 0 i n th e lo w economi c growt h cas e an d 2 9 percen t i n th e hig h growt h case , as compare d wit h thei r11-percen t shar e i n 1997 (Tabl e 10)
. Tabl e 10
. Petroleu m consumptio n an d net imports
. 199 7 an d 202 0 (millio n barrel s pe rday

) [sources ] Modes t Increase s Ar e Projecte d fo r U.S
. Refinin g Capacit y Fallin g deman d fo rpetroleu m an d th e deregulatio n o f th e domesti c refinin g industr yi n th e 1980

s le d t o 1 3 year

s of declin e i n U.S
. refiner ycapacit y[69]. That tren d wa s broke n i n 1995 b ya capacit

yincreas e of 0. 5 millio n barrel s pe r da yove ra 2-yea rperiod
. Financia l an d lega l consideration s mak e i t unlikel y that ne w refinerie s wil l b e buil t i n th e Unite d States , bu t addition s a t existin g refinerie s are expecte d t o increas e tota l U.S
. refinin g capacit yi n al l th e AE099 case s (Figur

e 104)
. Figur e 104
. Domesti c refinin g capacity
. 1975-202 0 (millio n barrel s pe rday ) fsources ] Distillatio n capacit

yi s projecte d t o grow fro m th e 199 7 leve l o f 16. 0 millio n barrel s pe rda

yt o 17. 3 millio n i n 202 0 i n th e lo w economi c growt h cas e an d 18. 7 millio n i n th e hig h growt h case , a s refinin g capacit yexceed s th e 198 1 pea k o f 18. 6 millio n barrel s pe rday
. Refinin g capacit yi s projecte d t o expan d o n th e East , West , an d Gul f coasts . Existin g refinerie s wil l continu e t o b e utilize d intensivel ythroughou t th e forecast , i n a rang e from 9 3 t o 9 6 percen t o f desig n capacity
. I n comparison , th e 199 7 utilizatio n rat e wa s 9 5 percent , wel l abov e th e rate s o f th e 1980

s an d earl y1990s
. Domesti c refinerie s wil l produce a slightl yhighe ryiel d of heatin g oi l an d je t fue l i n 202 0 i n respons e t o growin g deman d fo rthos e products
. I n 2020 , heatin g oi l i s projecte d t o represen t 9 percen t o f productio n an d je t fue l 1 3 percent , compare d wit h 7 percen t an d 9 percent , respectively , i n 1997
.



### Refine d Petroleu m Product s Mor e Petroleu m Us e b

y Industr y an d fo r Transportatio n I s Projected U.S
. petroleu m consumptio n i s projecte d t o increas e b y6. 0 millio n barrel s pe r da ybetwee n 1997 an d 2020J n th e referenc e case , 3. 9 millio n i n th e lo w economi c growt h case , an d 8. 2 millio n i n th e hig h growt h cas e (Figur e 105)
. A H th e case s sho

w growt h i n petroleu m consumptio n i n th e transportatio n an d industria l sector

s and , wit h th e exceptio n o f th e lo w worl d oi l pric e case , sligh t 

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### Annua l Energ y Outloo k

199 9 - Marke t

Tren d- Oil an dGa s Price s Pag e 9 o f 1 0 decline s i n residential , commercial , an d electri c utilit yoi l use . Figur e 105
. Chang e i n petroleu m consumptio n b ysecto ri n fiv e cases , 1997 - 202 0 (millio n barrel s pe rday ) fsources l Most of th e increas e i n petroleu m consumptio n occur s i n th e transportatio n sector , whic h accounte d fo rabou t 6 5 percen t of U.S
. petroleu m use i n 1997
. That shar e grow s t o 6 9 percen t i n th e lo

w oi l pric e cas e an d 7

2 percen t i n th e low economi c growt h cas e i n 2020
. Gasolin e accounts fo rabou t 4 5 percen t o f th e projecte d growt h i n tota l petroleu m consumption , je t fue l 2 4 percent , diese l fue l 4 percent , an d heatin g oi l 9 percent . Al l thes e fuel s ar e "ligh t products, " whic h ar e mor e difficul t t o produc

e tha n suc h heavie rproducts as asphal t an d residua l fue l oil
. A shif t i n consumptio n pattern s i s expecte d withi n th e transportatio n sector . Gasoline , whic h i n 199

7 represente d 6 5 percen t o f th e petroleu m consume d fo r transportation , shrink

s t o a 61-percen t shar

e i n 2020 , as alternative fuel s penetrat e transportatio n markets
. Th e je t fue l shar e rise s from 1 3 percen t i n 199 7 t o 1 7 percen t as ai rtrave l increase s substantially
. Th e share fo rdiese l decline s from 1 8 percen t t o 1 4 percent . Wit h th e emergence of biomass-base d ethanol , th e us e o f ethano l t o boost octan e o roxyge n i n gasolin e increase s from abou t 80,00 0 barrel s pe rda yi n 1997 t o 180,00 0 barrel s pe rda yi n 2020
. Highe r Processin g Cost s Ar e Expected fo r Gasolin e an d Jet Fue l Refine d produc

t price s ar e determine d b

ycrud e oi l costs , refinin g proces s cost s (includin g refine rprofits) , marketin g costs , an d taxe s (Figur e 106)
. I n th e AE099 projections , crud e oi l cost s continu e t o mak e th e greates t contributio n t o produc t prices , an d marketin g cost s remai n stable , bu t th e contribution s o f processin g cost s an d taxe s chang e considerably
. Figure 106
. Component

s of refine d produc

t costs . 199 7 an d 202 0 (199 7 dollar s pe rgallon ) fsources l Th e processin g cost s fo rgasolin e an d je t fue l increas e b y6 cent s an d 7 cent s pe rgallon , respectively , betwee n 1997 an d 2020
. Fo rth e most part , th e increase s ca n b e attribute d t o th e growt h i n deman d fo rthes e products
. A smal l portio n o f th e increase s ca n b e attribute d t o investment s relate d t o compliance wit h refiner

yemissions , health , an d safet yregulations , whic h ad d 1 t o 3 cent s pe rgallo n t o th e processin g cost s o f ligh t product s (gasoline , distillate , je t fuel , kerosene , an d liquefie d petroleu m gases)
. Wherea s processin g costs ten d t o increas e refine d produc t prices , assumption s abou t Federa l taxes ten d t o slow th e growt h o f moto rfuel s prices
. I n keepin g wit h th e AE099

assumptio n o f curren t laws an d legislation , Federa l moto rfuel s taxe s are assume d t o remai n a t nomina l 199 7 level s throughou t th e forecast. Federa l taxes hav

e actuall ybee n raise d sporadicall yi n th e past . Stat e moto r fuel s taxes are assume d t o kee p u p wit h inflation , a s theyhave i n th e past . Th e net impac t o f thes e assumption s i s a decreas e i n Federa l taxe s betwee n 199 7 an d 2020—

9 cent s pe rgallo n fo rgasoline , 1 1 cent s fo rdiese l fuel , an d 2 cent s fo rje t fuel
.
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.

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### Annua l Energy outloo k

lyy y - Marke

t tren d- Oi

l an dGa s Price s Page 1 0 o f 1 0
Cal l th e Nationa l Energ yInformatio n Cente r(NEIC ) (202 ) 586-880 0 9A M - 5P M easter n tim e Specialize d Service s fro m NEI C I f yo u ar e havin g technica l problem s wit h thi s site , pleas e contac t th e EI A Webmaste ra t wmaster@eia.doe.go v



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# Forecas t Comparison s

^3

## Forecas t

Comparison s Thre e othe r

organization s —DRI/McGraw-Hil l (DRI) , th e WEF A Grou p (WEFA) , an dth e Ga s Researc h Institut e (GRI ) —als o produc e compre hensiv e energ y projection s wit h atim e horizo n simila r t o tha t o f AE099. Th e mos t

recen t projec
tion s fromthes e organization s (DRI , Apri l 1998 ; WEFA , 1998 ; GRI , Augus t 1998 ) an dother s tha t concentrat e o n petroleum , natura l gas , an dinter
nationa l oi l market s ar e compare dwit h th e AE099 projection s i n thi s section . Economi c Growt h Difference s i n long-ru n economi c forecast s ca n b e trace dprimaril y t o differen t view s o f

th e majo r supply-sid e determinant s of growth : labo r

forc e an d productivit y change . Othe r forecast s ar e presente d i n Tabl e 12 . Th e WEF A forecas t show s th e highes t economi c growt h compare dt o th e AE099an dDR I referenc e cases , includin g highe r growt h rate s fo r th e labo r

force . Th e AE099long-ru n forecas t o f economi c growt h i s highe r tha n th e AE098forecas t b y 0. 2 percent , whe n compare do n asimila r basis , wit h aprojecte dannua l growt h rat e fo r GD P o f 1. 8 percen t fro m199 7 t o 2020 . Table 12. Forecasts of

economic growth, 1997-2020 Average annual

percentage growth Forecast AE099 Low growth Reference High growth DRI Low Reference High WEFA Low Reference High Real

GDP 1.5 2.1 2.6 1.8 2.1 2.3 1.9 2.3 2.6 Laborforce

0.5 0.8 1.0 0.5 0.8 1.0 0.9 1.1 1.3 Productivity

1.0 1.3 1.6 1.3 1.3 1.3 1.0 1.2 1.3 I n th e 199 8 Economic Report of the President, rea l GD P growt h o f

2. 3 percen t

ayea r betwee n 199 7 an d 200 5 wa s projected . AE099project s annua l growt h o f 2. 5 percen t

ove r th e sam e period . Worl d Oi l Price s Comparison s wit h othe r oi l pric e forecasts—includ
in g the , Internationa l Energ y Agenc y (IEA) , Petro
leu mEconomic s Ltd . 0?EL) , Petroleu mIndustr y Researc h Associates , Inc . 0?DRA) , Natura l Re
source s Canad a(NRCan) , an dB T Ale x Brow n (BTAB)—ar e show n i n Tabl e 1 3 (IEA , 1996 ; PEL , Februar y 1998 ; PIRA , Octobe r 1997 ; NRCan , Apri l 1997 ; BTAB, Septembe r 1998) . Wit h th e exceptio n of IE A i n 200 5 an dPEL , th e rang e betwee n th e AE099lo w an dhig h worl doi l pric e case s span s th e rang e of othe r publishe dforecast s beyon d2005 . Table 13. Forecasts of world oil prices, 2000-2020 1997 dollars perbarrel Forecast 2000 2005 2010 2015 2020 AE099 reference AE099 high price AE099 low price DRI IEA1 IEA2 PEL PIRA WEFA GRI NRCan BTAB NA = not

available. 13.97

17.90 10.25 15.55 18.49 18.49 15.57 20.00 18.27 17.16 20.76 11.71 19.25 24.53 14.57 16.94 27.19 18.49 14.21 19.00 19.04 16.86 20.76 16.61 21.30 27.33 14.57 19.06 27.19 18.49 13.37 19.60 19.75 16.81 20.76 16.30 21.91 29.14 14.57 21.44 NA NA, 12.93 NA 20.52. 17.02 20.76 15.89 22.73 29.35 14.57 24.13 NA NA NA NA 21.32 NA 20.76 NA Tota l Energ y Consumptio n Th e AE099forecas t

o f end-us e secto r

energ y consumptio n ove r

th e nex t

tw o decade s show s fa r les s volatilit y tha n ha s occurre dhistorically . Betwee n 197 4 an d1984 , volatil e worl doi l market s dampene ddomesti c oi l consumption . Consumer s switche dt o electricity-base dtechnologie s i n th e building s sector , whil e i n th e transportatio n secto r ne w ca r fue l efficienc y nearl y doubled . Natura l ga s us e decline da s aresul t o f hig h price s an dlimita
tion s o n ne w ga s hookups . Betwee n 198 4 an d1995 , however , bot h petroleu man dnatura l ga s consump tio n rebounded , bolstere db y plentifu l supplie s an d declinin g rea l energ y prices . A s aconsequence , ne w ca r fue l efficienc y i n 199 5 wa s les s tha n 2 mile s pe r gallo n highe r

tha n i n 1984 , an dnatura l ga s us e (residential , commercial , an dindustrial ) wa s almos t 2 5 percen t

highe r tha n i t wa s i n 1984 . Give n potentiall y differen t assumption s about , fo r example , technologica l development s ove r th e nex t 2 0 years , th e forecast s fro mDRI , GRI , an dWEF A hav e remarkabl e similaritie s t o thos e i n AE099. Electricit y i s expecte dt o remai n th e fastes t growin g sourc e o f delivere denerg y (Tabl e 14) , althoug h it s rat e o f growt h i s dow n sharpl y fro mhistorica l rate s i n eac h o f

th e forecasts , becaus e man y traditiona l 8 8 Energ y Informatio n Administratio n / Annua l Energ y Outloo k 199 9 

# cA

## Forecas t Comparison s Table 14. Forecasts of average annual

growth rates forenergy consumption (percent)

History Projections Energy use 1974-1984-

1984 1996 AE099 DRI GRI WEFA (1997- (1997- (1997- (1997- 2020) 2020) 2015) 2020) Petroleum* Natural gas* Coal* Electricity Delivered energy Electricity losses Primary energy •0.1

•1.7 •3.0 3.0 •0.4 2.5 0.2 1.4 2.3 •1.5 2.6 1.9 2.0 2.0 1.3

0.9 0.4 1.4 1.2 0.6 1.1 1.2 0.8 •0.7 1.4 1.1 0.7 1.0 1.1 1.4 -0.4 1.8 1.2 1.0 1.2 1.3 0.8 0.2 1.7 1.2 0.9 1.1 'Excludes consumption by electric utilities. use s o f electricit y (suc h a s fo r ai r conditioning ) approac h saturatio n whil e averag e equipmen t efficiencie s rise . Petroleu mconsumptio n grow s a t th e sam e rat e a s i n recen t history . Consumptio n growt h fo r

th e remainin g fuel s slow s a s aresul t o f moderatin g economi c growth , fue l switching , an d increase dend-us e efficiency . 

### Residentia l an d Commercia l Sector s Growt h rate s i n energ y deman dfo r th e residentia l an dcommercia l sector s ar e expecte dt o decreas e b y mor e tha n 6 0 percen t

fromth e rate s betwee n 198 4 an d1996 , largel y becaus e o f projecte dlowe r

growt h i n population , housin g starts , commercia l floorspac e additions , an dcolde r

winte r weathe r i n 1996 . Othe r contributin g factor s includ e increasin g energ y efficienc y du e t o technica l innovation s an dlegis
late dstandards ; voluntar y governmen t efficienc y programs ; an dreduce dopportunitie s fo r additiona l marke t penetratio n o f

suc h en duse s a s ai r conditioning . Differin g view s o n th e growt h o f ne w use s fo r

energ y contribut e t o variation s amon g th e forecasts . B y fuel , electricit y (excludin g generatio n an dtrans missio n losses ) remain s th e fastes t growin g energ y sourc e fo r

bot h sector s acros s al l forecast s (Tabl e 15) . Natura l ga s us e als o grow s bu t a t lowe r rates , an dpetroleu mus e continue s t o fall . 

### Industria l Secto r I n al l th e forecasts , th e industria l secto r show s slowe r growt h i n primar y energ y consumptio n tha n Table 15. Forecasts of average annual

growth residential

and commercial

energy demand (percent) History Projections AE099 DRI

GRI WEFA 1984- (1997- (1997- (1997- (1997- 1996 2020) 2020) 2015) 2020) Forecast Residential Petroleum Natural gas Electricity Delivered energy Electricity losses Primary energy 0.6

1.2 2.8 2.1 2.2 2.1 •1.2

0.6 1.6 0.8 0.8 0.8 •0.6 0.8 1.1 0.7 0.3 0.5 •1.2 0.7 1.7 0.7 0.9 0.8 •0.5 0.7 1.9 1.0 1.1 1.1 Commercial Petroleum Natural gas Electricity Delivered energy Electricity losses Primary energy •3.9

1.9 3.3 1.5 2.7 2.1 •1.3

0.7 1.4 0.9 0.6 0.7 •0.9 0.5 1.4 0.8 0.7 0.8 •2.9 1.0 1.6 1.0 0.8 0.9 •0.6 0.6 1.6 1.0 0.8 0.9 i t di dbetwee n 198 4 an d199 6 (Tabl e 16) . Th e declin e i s attributabl e t o lowe r growt h fo r

GD P an dmanu facturin g output . I n addition , ther e ha s bee n a continuin g shif

t i n th e industria l outpu t mi x towar d les s energy-intensiv e products . Th e growt h rate s i n th e industria l secto r

fo r differen t fuel s betwee n 198 4 an d199 6 reflec t

ashif t frompetroleu mproduct s an d coa l t o agreate r

relianc e o n natura l ga s an delec
tricity . Natura l ga s us e grow s mor e slowl y tha n i n recen t histor y acros s th e forecasts , becaus e muc h o f th e potentia l fo r

fue l switchin g wa s realize ddurin g th e 1980s . A ke y uncertaint y i n industria l coa l fore
cast s i s th e environmenta l acceptabilit y o f coa l a s a boile r fuel . Table 16. Forecasts of

average annual

growth in industrial energy demand

(percent) History ' Projections
Forecast Petroleum Natural gas Coal Electricity Delivered energy Electricity losses Primary energy 1984-

1996 1.2 2.5 •1.3 1.7 2.1 1.2 1.9 AE099

(1997- 2020) 0.9 1.0 0.4 1.1 1.0 0.3 0.8 DRI (1997- 2020) 0.7 0.8 0.2 1.7 0.8 0.9 0.8 GRI (1997- 2015) 1.2 1.7 0.0 2.3 1.4 2.4 1.6 WEFA (1997- 2020) 1.5 0.8 0.0 1.5 1.1 1.6 1.2

Energ y Informatio n Administratio n / Annua l Energ y Outloo k 199 9 8 9 

# 6 T

## Forecas t

Comparison s Transportatio n Secto r Overal l fue l consumptio n i n th e transportatio n secto r i s expecte dt o gro w mor e slowl y tha n i n th e recen t pas t i n eac h of

th e alternativ e forecast s (Tabl e 17) . Al l th e forecast s anticipat e continue d rapi dgrowt h i n ai r

trave l a s wel l a s significan t increase s i n aircraf t

efficiency , whil e growt h i n light-dut y vehicl e trave l slow s considerably . Table 17. Forecasts of

average annual

growth transportation energy demand (percent) m

Forecast Motorgasoline Diesel fuel Jet fuel Residual fuel All energy Carand light truck travel Airtravel (revenue passenger-miles) Average new car fuel efficiency Gasoline prices History

1974- 1984- 1984 1995 0.1 4.5 1.9 1.4 0.9
2.8 7.0 4.5 1.8 NA = not available. 

### Electricit y AE099 (1997- 2020) Consumption 1.4 2.8 2.4 0.7 1.8 1.2

1.5 2.8 2.4 1.7 Key indicators 2.8 5.0 0.5 -3.1 1.6

3.1 0.6 0.3 Projections DRI (1997- 2020) 1.3 1.0 2.4' 2.4 1.5
2.1 3.4 0.5 0.5 GRI (1997- 2015) 0.5 1.9 2.3 3.3 1.4
1.4 2.8 0.9 -0.1 WEFA (1997- 2020) 0.8 1.3 3.0 2.6 1.4
NA NA NA 0.1 Compariso n acros s forecast s show s sligh t variatio n i n projecte delectricit y sale s (Tabl e 18) . Sale s projection s fo r

202 0 rang e fro m1,34 9 billio n kilo
watthour s (DRI) t o 1,63 5 billio n kilowatthour s (WEFA ) fo r

th e residentia l sector , a s compare dwit h th e AE099referenc e cas e valu e o f 1,55 7 billio n kilo
watthours . Th e forecast s fo r tota l electricit y sale s i n 202 0 rang e from4,27 9 billio n kilowatthour s (DRT) t o 4,58 1 billio n kilowatthour s O^EFA) . Al l th e pro jection s fo r

tota l electricit y sale s i n 202 0 fal l withi n th e rang e o f

th e AE099lo w an dhig h economi c growt h case s (4,01 3 an d4,68 7 billio n kilowatthours , respectively) . Differen t assumption s governin g expecte deconomi c activity , couple dwit h diversit y i n th e estimatio n of

penetratio n rate s fo r energy efficien t technologies , ar e th e primar y reason s fo r variatio n amon g th e forecasts . Al l th e forecast s compare dher e agre e tha t stabl e fue l price s an dslo w growt h i n electricit y deman d relativ e t o GD P growt h wil l ten dt o kee p th e pric e o f electricit y stable—o r

declinin g i n rea l terms—unti l 2020 . Bot h th e DR I an dGR I forecast s assum e tha t th e electri c powe r

industr y wil l b e full y restructured , resultin g i n averag e electricit y price s tha t approac h long-ru n margina l costs . AE099als o assume s tha t competitiv e pressure s wil l gro w an dcontinu e t o pus h price s dow n unti l th e late r year s o f

th e projections . AE099als o assume s tha t increase d competitio n i n th e electri c powe r industr y wil l lea d t o lowe r operatin g an dmaintenanc e costs , lowe r genera l an dadministrativ e costs , earl y retiremen t o f inefficien t

generatin g units , an dothe r cos t re ductions . Further , i n th e DR I forecast , i t i s assume d tha t time-of-us e electricit y rate s wil l caus e som e flattening o f

electricit y deman dflower pea k perio d sale s relativ e t o averag e sales) , resultin g i n bette r utilizatio n o f

capacit y an dcapita l cos t savings . Th e distributio n o f

sale s amon g sector s affect s th e mi x o f capacit y type s neede dt o satisf y sectora l de
mand . Althoug h th e AE099mi x o f capacit y amon g fuel s i s simila r

t o thos e i n th e othe r

forecasts , smal l difference s i n sectora l demand s acros s th e forecast s lea dt o significan t

change s i n capacit y mix . Fo r example , growt h i n th e residentia l sector , couple d wit h a n oversuppl y o f

baseloa dcapacity , result s i n a nee dfo r mor e peakin g an dintermediat e capacit y tha n baseloa dcapacity . Consequently , generator s ar e expecte dt o pla n fo r mor e combustio n turbin e an dfue l cel l technolog y tha n coal , oil , o r ga s stea m capacity .

9 0 Energ y Informatio n Administratio n / Annua l Energ y Outloo k 199 9 

# LettP.6 8



## Forecas t Comparison s Table 18. Comparison of electricity forecasts (billion kilowatthours, Projection
Average end-use price (1997 cents perkilowatthour) Residential Commercial Industrial Net energy for

load Coal Oil Natural gas Nuclear Hydroelectric/other° Nonutility sales to grid b Net imports Electricity sales Residential Commercial/othere Industrial Capability (gigawatts) * * Coal Oil and gas Nuclear Hydroelectric/othera Average end-use price (1997 cents perkilowatthour) Residential Commercial Industrial Net energy forload Coal Oil Natural gas Nuclear Hydroelectric/other9 Nonutility sales to grid b Net imports Electricity sales Residential Commercial/otherc Industrial Capability (gigawatts) * « Coal Oil and gas Nuclear Hydroelectric/other" Reference

5.8 7.3 6.2 3.8 4,415 2.151 26 1,213 419 400 180 27 4,113 1,446 1,387 1,280 977 326 470 56 124
5.6 7.1 6.0 3.6 4,661 2,298 24 1,349 359 419 184 27 4,345 1,557 1,448 1,339 1,033 343 514 49 127 AE099

Low economic growth High

economic growth 2015 5.4 6.7 5.6 3.5 4,153 2.081 23 1,047 411 394 170 27 3,875 1,389 1,345 1,141 927 320 429 55 123 6.3

7.9 6.8 4.1 4,680 2,225 26 1,353 419 412 189 27 4,355 1,506 1,425 1,423 1,028 336 510 56 126 2020 5.1 6.4 5.3 3.3 4,289 2,139 20 1,191 342 406 171 27 4,013 1,478 1,389 1,146 963 328 465 46 124 6.1

7.7 6.6 4.0 5,037 2,497 25 1,474 373 444 197 27 4,687 1,637 1,505 1,544 1,105 366 557 51 132 except

where noted)

WEFA

5.76 7.10 6.29 3.82 4,573 2,243 48 1,187 479 351 223 42 4,213 1,488 1,365 1,360 937 356 392 65 124
5.56 6.84 6.04 3.70 4,974 2,472 49 1,463 372 351 223 44 4,581 1,635 1,479 1,467 1,008 389 446 48 124 Otherforecasts

GRI

5.30 6.90 6.20 3.10 4,733 2,563 32 1,099 453 407 168 39 4,350 1,456 1,363 1,532 881 372 345 64 123
NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA DRI

5.40 6.80 5.80 3.80 4,639 2,428 121 1,022 582 444 NA 38 4,062 1,285 1,338 1,440 972 403 359 93 117
5.30 6.60 5.70 3.70 4,883 2,638 130 1,084 549 443 NA 86 4,279 1,349 1,897 1,534 1,013 428 380 87 117 ""Other " include s conventional hydroelectric , geothermal , wood, woo dwaste , municipal soli dwaste , othe r biomass , solar

an dwin d power , plu s asmal l quantit y o f petroleu mcoke . Fo r

nonutility generators , "other " als o include s wast e heat , blas t furnac e gas , an dcok

e ove n gas . *Fo r AE099, include s only ne t sale s fro mcogeneration ; fo

r th e othe r forecasts , als o include s nonutility sale s t o th e grid . "Other' ' include s sale s o

f electricity t o government , railways , an dstree t lighting authorities . d Fo r DRI , "capability " represent s nameplat e capacity , fo r th e others , "capability " represent s ne t summe r capability . 'GR I generatin g capability include s onl y centra l utilit y an dindependen t power produce r capacity . I t

doe s no t includ e cogeneratio n capacit y i n th e commercia

l an dindustria l sectors , which wouldaddanothe r 6 0 gigawatts . Sources : AE099: AE09 9 Nationa l Energ y Modeling System , run s AEO99B.D100198 A (referenc e case) , LMAC99.D100198 A (lo w economic growt

h case) , an dHMAC99.D100198A (hig h economic growt h case) . WEFA : Th e WEF A Group , US. Power

Outlook (1998) . GRI : Gas Researc h Institute , GRI Baseline Projection of

U.S. Energy Supply and Demand, 199 9 Editio n (Augus t 1998) . DRI : DRI/McGraw-Hill , World Energy Service: U.S. Outlook (April 1998) . Energ y Informatio n Administratio n / Annua l Energ y Outloo k 199 9 9 1 

# i__

I

## Forecas t

Comparison s Natura l Ga s Th e diversit y amon g publishe dforecast s of natura l ga s prices , production , consumption , an dimport s (Tabl e 19 ) indicate s th e uncertaint y of futur e marke t trends . Becaus e th e forecast s depen d heavil y o n th e underlyin g assumption s tha t shap e them , th e assumption s shoul db e considere dwhe n differen t projection s ar e compared . Th e forecast s fo r tota l natura l ga s consumptio n i n 201 5 var y from a hig h of 32.9 9 trillio n cubi c fee t i n th e AE099hig h economi c growt h cas e t o alo w o f 28.4 3 trillio n cubi c fee t i n th e lo w economi c growt h case . Th e variatio n i n th e 202 0 projection s i s eve n greater , wit h th e highe r projectio n onl y 1 6 percen t abov e th e lowe r projectio n i n 201 5 bu t

2 2 percen t

abov e th e lowe r projectio n i n 2020 . Th e hig h projectio n fo r 202 0 i s 34.8 1 trillio n cubi c fee t

i n th e AE099hig h economi c growt h case , compare dwit h alo w o f 28.5 8 trillio n cubi c fee t

i n th e DR I forecast . Th e America n Ga s Associatio n (AGA ) forecas t (Jul y 1998 ) fo r growt h i n residentia l consumptio n relativ e t o historica l level s i s significantl y highe r tha n th e others , wherea s th e DR I an dWEF A forecast s of growt h i n commercia l consumptio n la g behin dth e rest , eve n b y 2020 . GR I i s th e mos t optimisti c abou t th e futur e o f

industria l consumption , i n bot h absolut e an dpercentag e growt h terms . B y alarg e margin , al l forecaster s expec t th e greates t

growt h t o b e i n th e electricit y generato r sector , wit h WEF A leadin g th e pack . Th e DR I growt h rat e fo r generato r consumptio n o f

natura l ga s throug h 202 0 i s les s tha n one-thir do f

WEFA' s forecas t

(althoug h i t shoul db e note dtha t

DR I include s cogenerator s i n thi s category) . Th e projection s of

averag e lowe r

4 8 natura l ga s well
hea dprice s i n 201 5 i n th e AE099hig h economi c growt h an dreferenc e case s ar e highe r tha n th e othe r forecasts , wit h th e lowes t pric e acros s al l forecast s comin g fro mWEFA , a t 1 5 percen t

belo w th e AE099referenc e cas e an d3 percen t belo w th e lo w economi c growt h case . B y 202 0 th e wellhea d pric e forecast s fromDR I an dWEF A fal l withi n th e rang e of th e AE099cases , wit h DR I abov e th e AE099referenc e cas e an dWEF A below . Excludin g th e AE099lo w economi c growt h case , th e 201 5 residentia l an dcommercia l price s ar e highes t fo r GR I an dlowes t

fo r AGA , wit h adifferentia l betwee n th e tw o o f

$0.7 9 an d$0.9 7 (1 3 an d1 9 percent) , respectively , fo r

th e tw o sector s fliowever, th e AG A price s d o no t

includ e som e Stat e an dloca l taxes) . Th e industria l (an dt o alesse r exten t th e electricit y generator ) sectora l price s ar e difficul t t o compar e i n absolut e term s becaus e o f difference s i n definition s acros s th e forecastin g groups . Fo r 2015 , th e AE099 referenc e case , DRI , an dWEF A forecas t sligh t growt h i n industria l prices , GR I asligh t decline , an d AG A amor e significan t decline . Fro m201 5 t o 202 0 th e DR I forecas t

fo r th e industria l pric e increase s mor e significantl y tha n th e others , whic h sho w mor e moderat e growt h o r

asligh t declin e (i n th e AE099 lo w economi c growt h case) . Ther e ar e significan t

difference s i n th e projecte d growt h rate s fo r

natura l ga s price s t o electricit y generators . GRI , WEFA , an dAG A projec t asligh t declin e throug h 2015 , wherea s DR I project s sligh t growt h an dAE099mor e significan t growth , especiall y i n th e hig h economi c growt h case . Throug h 2020 , th e DR I forecas t fo r ga s price s t o electricit y generator s rises mor e rapidly , comin g clos e t o th e AE099referenc e cas e forecast , wit h th e WEF A an dEI A forecast s showin g onl y moderat e o r n o growth .

9 2 Energ y Informatio n Administratio n / Annua l Energ y Outloo k 199 9P.7 0



## Forecas t Comparison s Table 19. Comparison of natural gas forecasts (trillion cubic feet, except where noted) Projection

Lower 48wellhead

price (1997 dollars per

thousand

cubic feet) Dry gas production b Net imports Consumption Residential Commercial 11 Industrial 11 Electricity generators f Other * End-use prices (1997 dollars per

thousand

cubic feet) Residential Commercial d Industrial d Electricity generators f Lower 48wellhead

price (1997 dollars per

thousand

cubic feet) Dry gas production 11 Net imports Consumption Residential Commercial'1 Industrial d Electricity generators f Other* End-use prices (1997 dollars per

thousand

cubic feet) Residential Commercial d Industrial 11 Electricity generators 1 Reference

2.62 26.11 4.78 30.81 5.61 3.86 9.87 8.42 3.05 5.95 5.22 3.32 3.24
2.68 27.35 5.02 32.30 5.77 3.88 10.24 9.16 3.24 5.91 5.24 3.40 3.31 AE099

Low economic growth 2015 2.29 23.97 4.54 28.43 5.31 3.73 9.20 7.33 2.85 5.78 4.96 2.95 2.91 2020 2.29 24.93 4.69 29.53 5.40 3.72 9.30 8.12 3.00 5.72 4.93 2.93 2.90 High economic growth
2.91 28.01 5.07 32.99 5.90 3.97 10.55 9.34 3.23 6.11 5.47 3.65 3.52
3.09 29.62 5.26 34.81 6.13 4.04 11.17 10.00 3.48 6.14 5.56 3.87 3.71 WEFA

2.23 24.83 5.14 30.12 5.70 3.51 9.92 8.52 2.47 6.21 5.38 3.58> 2.67
2.36 26.70 5.31 32.18 5.92 3.63 10.15 9.83 2.65 6.13 5.33 3.68' 2.76 Other

forecasts GRI

2.36° 27.31 3.51" 31.28 5.66 3.91 12.95 7.19 1.59>>
6.71 5.72 2.93 2.61
NA NA NA NA NA NA NA NA NA NA NA NA NA DRI

2.52 23.47 5.20 28.51 5.79 3.55' 8.99' 7.55 d 2.64 6.61 5.69 3.73 J 2.93
2.82 23.33 5.41 28.58 6.00 3.53' 8.99' 7.40 d 2.67 6.85 5.93 4.01 ] 3.23 AGA

2.31" 26.75 4.15 30.99 6.23 4.01 10.84 6.77 3.14 5.92' 4.75' 2.76<•* 2.61'
NA NA NA NA NA NA NA NA NA NA NA NA NA "Firs t purchas e pric e o r

fieldacquisitio n price , becaus e severanc e taxe s an dgatherin g charge s ar e included . 'Doe s no t includ e supplementa l fuels . Include s supplementa l fuels . ''include s ga s consume di n cogeneration . •Doe s no t includ e cogenerators . Include s independen t

powe r producer s an ddoe s no t

includ e cogenerators . Include s leas e an dplan t

fuel s an dpipelin e fuel . ^Include s only transportatio n use . 'Doe s no t includ e certai n Stat e an dloca l taxe s levie do n customers . •ton-systemsale s o r

syste mga s (i.e. , doe s no t

includ e ga s delivere dfo

r th e account

o f others) . *Volume-weightedaverag e o f "system " ga s an d"transportation " gas . N A = Not available . Note : Assume dconversion factors : electricity generators , 1,02 2 Bt u pe r cubi c foot ; othe r

end-us e sectors , 1,02

9 Bt u pe r cubi c foot ; no t imports , 1,02

2 Bt u pe r cubi c foot ; productio n an dothe r consumption , 1,02 8 Bt

u pe r cubi c foot . Sources : AE099-. AE09 9 Nationa l Energ y Modelin g System , run s AEO99B.D100198 A (referenc e case) , LMAC99.D100198 A (low economic growt

h case) , an dHMAC99.D100198 A (hig h economic growt h case) . WEFA : Th e WEF A Group , Natural

Gas Outlook

(1998) . GRI : Ga s Researc h Institute , GRI Baseline Projection of

U.S. Energy Supply and Demand, 199 9 Editio n (Augus t 1998) . DRI : DRI/McGraw-Hill , Wor W Energy Service: U.S. Outlook (April 1998) . AGA : America n Gas Association , 1998AGA-TERA Base Case (Jul y 1998) .
Energ y Informatio n Administratio n / Annua l Energ y Outloo k 199 9 9 3 

# (A

## Forecas t

Comparison s P.7 1

Petroleu m Projecte dprice s fo r

crud e oi l i n th e AE099lo w an d hig h oi l pric e case s boun dth e 201 0 an d202 0 projection s i n five othe r petroleu mforecast s (Tabl e 20)—-th e AE099referenc e case , WEFA , GRI , DRI , an dth e Independen t Petroleu mAssociatio n o f Americ a(IPAA ) (Apri l 1998) . Comparison s wit h GR I an dIPA A forecasts , whic h d o no t exten dt o 2020 , appl y onl y t o 2010 . Th e AE099referenc e cas e oi l pric e projectio n fo r

201 0 i s $1.5 5 abov e tha t o f WEFA , $2.5 4 abov e tha t o f DRI , an d$3.8 0 abov e tha t o f GRI . B y 202 0 th e AE099referenc e cas e oi l pric e fall s betwee n th e tw o othe r forecasts—$1.4 1 abov e WEF A an d$0.9 5 belo w DRI . Th e AE099referenc e cas e projectio n fo r domesti c oi l productio n i n 201 0 fall s betwee n th e WEF A an dDR I projection s bu t

i s 0.5 0 millio n barrel s pe r da y shor t o f th e GR I an dIPA A projections . Th e GR I projectio n reflect s natura l ga s liquid s (NGL ) production , whic h i s highe r tha n i n an y othe r

case , whil e IPA A reflect s th e secon dhighes t

productio n o f

bot h crud e oi l an d NGL . A s aresult , th e GR I an dIPA A projection s o f tota l domesti c productio n i n 201 0 ar e slightl y highe r tha n eve n th e AE099hig h oi l pric e case . Th e AE099 referenc e cas e projectio n fo r 202 0 i s comparabl e t o th e DR I an dWEF A forecasts . Al l thre e projection s ar e bounde db y th e AE099lo w an dhig h oi l pric e cases . Th e thre e AE099case s reflec t relativel y hig h projection s fo r

petroleu mdeman di n 2010 . Th e lo w oi l pric e an dreferenc e cas e projection s ar e highe r tha n th e fou r

othe r cases , an dth e hig h oi l pric e projectio n i s highe r

tha n th e IPAA , GRI , an dWEF A forecasts . Deman dgrowt h i n AE099i s relativel y slo w betwee n 201 0 an d2020 , an db y 202 0 th e AE099projection s ar e comparabl e t o th e DR I an d WEF A forecasts . Ne t petroleu mimport s i n th e AE099referenc e an d lo w pric e case s ar e wel l abov e th e level s of th e othe r forecasts . Th e projecte dpercentag e of petroleu m consumptio n fro mimports , whic h i s a n indicato r o f th e relativ e directio n o f production , ne t

imports , an d consumption , i s als o highes t i n th e AE099lo w oi l pric e case , followe db y th e referenc e case . Fo r 201 0 th e impor t

shar e o f

consumptio n range s from5 3 percen t (IPAA ) t o 6 5 percen t

i n th e AE099lo w oi l pric e case . Th e lo w IPA A impor t shar e reflect s stronge r domesti c productio n tha n i n th e othe r forecasts . Th e relativel y hig h impor t shar e i n th e AE099lo w oi l pric e cas e reflect s th e lowes t productio n an dhighes t consumptio n projections . Fo r 202 0 th e impor t

share s rang e from6 1 percen t i n th e WEF A an dAE099hig h oi l pric e case s t o 7 1 percen t

i n th e lo w pric e case . Th e WEF A an d AE099hig h oi l pric e case s hav e th e lowes t impor t share s fo r

differen t reasons ; projecte dconsumptio n i s relativel y hig h i n th e WEF A case , wherea s productio n i s hig h an ddeman di s lo w i n th e AE099 hig h oi l pric e case . Althoug h th e AE099referenc e cas e an dDR I hav e simila r impor t share s a t

6 5 an d 6 4 percent , respectively , the y hav e differen t impor t pictures . Th e AE099referenc e cas e reflect s ne t crud e oi l import s tha t

ar e 1.9 6 millio n barrel s pe r da y highe r

tha n i n th e DR I forecas t an dpetroleu m produc t import s tha t

ar e 1.6 1 millio n barrel s pe r da y lowe r

tha n DRI . Th e differen t spli t betwee n crud e oi l an dproduc t import s reflect s agreate r capacit y fo r

refinin g petroleu mproduct s i n th e AE099referenc e case .

9 4 Energ y Informatio n Administratio n /Annua l Energ y Outloo k 199 9 

# 70

## Forecas t Comparison s Table 20. Comparison of petroleum forecasts (million barrels per day, except

where noted) Projection AE099 Reference Low

world oil price High

world oil price Otherforecasts

WEFA GRI DRI IPAA 2010 World oil price (1997 dollars per

barrel) 21.30 14.57 27.33 19.75 17.50' 18.76 NA Crude oil

and NGL production Crude oil Natural gas liquids Total net imports Crude oil Petroleum products Petroleum demand Motorgasoline Jet fuel Distillate fuel Residual fuel Other Import share of

product supplied (percent) World oil price (1997 dollars perbarrel) Crude oil

and NGL production Crude oil Natural gas liquids Total net imports Crude oil Petroleum products Petroleum demand Motorgasoline Jet fuel Distillate fuel Residual fuel Other

. Import share of

product supplied (percent) 7.74 5.59 2.15 13.70 10.97 2.73 22.69 10.01 2.46 3.99 0.72 5.51 60

22.73 7.41 4.96 2.45 15.97 11.97 4.00 24.66 10.69 3.03 4.28 0.83 5.82 65 7.07

4.96 2.11 15.46 11.76 3.70 23.60 10.20 2.48 4.11 1.08 5.72 65

14.57 6.53 4.12 2.41 18.35 13.13 5.22 25.95 11.01 3.08 4.47 1.24 6.15 71 8.22

6.06 2.16 12.62 10.05 2.57 22.13 9.77 2.44 3.93 0.66 5.33 57 2020 29.35 7.94 5.48 2.46 14.63 11.50 3.13 23.96 10.40 2.96 4.21 0.78 5.62 61 7.63

5.44 2.19 12.06 9.79 2.27 21.83 8.74 2.31 4.03 0.93 5.82 55

21.32 7.40 4.90 2.49 15.19 10.95 4.24 24.80 9.61 3.13 4.39 1.04 6.64 61 8.24

5.56 2.68 NA NA NA 21.46 8.72 2.24 3.98 1.07 5.45 NA

NA NA NA NA NA NA NA NA NA NA NA NA NA NA 7.99

5.69>> 2.30 13.25 9.92 3.34 22.15 10.03 2.32 3.97 0.98 5.45 58

23.68 7.42 S.l&> 2.24 15.61 10.01 5.61 24.57 10.73 2.76 4.19 0.92 5.97 64 8.26

5.95 2.31 11.57 NA NA 21.98 9.46 2.17 4.14 0.95 5.26 53

NA NA NA NA NA NA NA NA NA NA NA NA NA NA "Composit

e o f U.S . refiners ' acquisitio n cost . ''Include s shal e an dother . N A = No t available . Sources : AE099-. AE09 9 Nationa l Energ y Modelin g System , run s AEO99B.D100198 A (referenc e case) , LWOP99.D100298 B (low worl doil pric e case) , an dHWOP99.D100298 B (hig h worl doil pric e case) . WEFA : Th e WEF A Group , U.S. Energy Outlook (1998) . GRI : Ga s Researc h Institute , GRI Baseline Projection of

U.S. Energy Supply and Demand, 199 9 Editio n (Augus t 1998) . DRI : DRl/McGraw
Hill , World

Energy Service: U.S. Outlook (April 1998) . IPAA : Independen t Petroleu mAssociatio n o

f America , IPAA Supply and Demand Committee Long-Run Report (April 1998) .

Energ y Informatio n Administratio n / Annua l Energ y Outloo k 199 9 9 5 

# IL

## Forecas t

Comparison s P.7 3



### Coa l Coa l forecasts , b y WEF A an dDR I ar e simila r t o th e AE099projection s (Tabl e 21) . Consumptio n b y electricit y generator s i n 201 5 fall s withi n th e rang e spanne db y th e AE099lo w economi c growth , reference , an dhig h economi c growt h case s (1,07 3 t o 1,14 8 millio n tons) . Coa l consumptio n i n 201 5 a t domesti c cokin g plant s i s slightl y highe r i n bot h th e WEF A (2 6 millio n tons ) an dDR I (2 4 millio n tons ) forecast s tha n i n AE099(2 1 t o 2 2 millio n tons) , reflectin g th e expectatio n tha t th e replace
men t o f coke-base dsteelmakin g wit h electri c ar c technology , les s coke-intensiv e method s wit h pulverize dcoa l injection , an dadvance dnon-coke
base dmethod s wil l procee dmor e graduall y tha n projecte di n AE099. WEF A an dDR I projec t industrial/othe r

coa l consumptio n i n 201 5 a t value s tha t ten dtowar dth e lowe r

en dof th e AE099range : 7 3 an d8 8 millio n tons , respectively . Th e AE099 rang e i s fro m7 7 throug h 8 6 t o 9 4 millio n tons . Th e differenc e i s largel y attributabl e t o differin g view s of consumptio n fo r

cogeneration . Tota l domesti c deman drange s from1,20 0 millio n ton s (WEFA ) t o 1,24 7 millio n ton s (DRI) , wherea s AE099range s from1,17 2 t o 1,26 3 millio n tons . Th e WEF A forecas t

ha s a n optimisti c outloo k fo r ne t coa l exports , showin g 10 3 millio n tons , whil e DR I ha s 7 9 millio n ton s an dAE099ha s 8 4 millio n ton s i n 2015 . Th e differenc e stem s fromdifferen t view s o f

th e competitivenes s o f

U.S . mine s i n aworl dmarke t wher e competitor s wit h lo w labo r cost s an dundevel
ope dresource s ar e furthe r aide db y th e persisten t strengt h o f

th e dolla r

i n internationa l markets . Productio n forecast s follo w fro mth e difference s i n projecte ddemand , wit h WEF A suggestin g 1,30 0 millio n ton s i n 201 5 an dDR I 1,32 7 millio n tons . AE099bracket s thes e value s b y projectin g 1,25 3 (lo w economi c growt h case) , 1,29 4 (referenc e case ) an d1,34 6 millio n ton s (hig h economi c growt h case) . Althoug h th e coa l productio n an dconsumptio n value s ar e similar , WEF A forecast s minemout h an d delivere dprice s tha t

ar e abou t

6 t o 1 0 cent s pe r millio n Bt u highe r

tha n thos e i n AE099, whil e DRI' s delivere dpric e (DR I doe s no t forecas t minemout h prices ) i s anothe r 8 cent s pe r

millio n Bt u abov e WEFA's . Coal' s pric e advantag e relativ e t o natura l ga s a t

existin g stea mboiler s ma y excee d 2 0 cent s pe r

millio n Btu , s o tha t smalle r pric e difference s hav e littl e effec t o n th e quantit y demanded . Th e differen t pric e forecast s aris e fro m differen t expectation s o f

labo r productivit y improve
ment s i n minin g an dfro mth e differen t marke t share s projecte dfor

th e ver y lo w cost , low-sulfu r coal s o f th e Powde r

Rive r Basin . I n 2020 , WEF A an dDR I projec t productio n total s tha t li e betwee n thos e forecas t fo r th e referenc e an d hig h economi c growt h case s i n AE099, stemmin g fro madifferen t

vie w o f tota l deman dan dinterfue l 

### competition . However

, th e entir e rang e i s brackete d b y th e AE099hig h an dlo w growt h cases , wit h projecte dproductio n o f

1,28 1 an d1,44 7 millio n tons , respectively . WEF A an dDR I agai n hav e slightl y highe r cokin g coa l consumption , althoug h thei r industria l consumptio n forecast s compar e closel y wit h th e AE099lo w growt h an dreferenc e cases . Difference s i n ne t

export s follo w th e patter n estab
lishe di n 2015 , wit h AE099an dDR I projectin g 8 6 an d8 0 millio n tons , respectively , an dWEF A 11 9 millio n tons . Again , delivere dprice s ar e a s muc h a s 1 4 (WEFA ) t o 2 0 (DRI ) cent s pe r millio n Bt u abov e th e AE099prices , bu t the y hav e littl e effec t o n demand . Othe r

tha n th e difference s i n expor t tonnag e an di n minemout h an ddelivere dprices , th e AE099value s d o no t diffe r significantl y fro m th e WEF A an dDR I forecasts . Th e GR I /

Hil l & Associate s coa l forecas t (Marc h 1998 ) describe s adifferen t future , especiall y afte r 200 5 [74]. Althoug h th e potentia l impac t o f U.S . implementatio n o f

th e Kyot o Protoco l o n greenhous e ga s emission s i s specificall y excluded , th e author s incorporat e th e economi c burden s tha t the y projec t woul db e place do n coa l consumptio n b y ful l imple
mentatio n o f

th e proposal s containe di n th e Clea n Ai r Powe r Initiative , whic h woul dseverel y restric t emission s o f

particulates . Th e resultin g forecas t show s productio n growin g a s i n th e othe r forecast s unti l 2006 . I t

decline s t o 95 7 millio n ton s i n 201 5 (AE099range s from1,25 3 t o 1,34 6 millio n ton s i n 2015) . B y 2020 , coa l productio n ha s falle n t o 93 8 millio n tons , whil e tha t i n th e othe r

forecast s rises t o betwee n 1,28 1 an d1,44 7 millio n tons . Al l element s o f

th e GRI/Hil l forecas t ar e equall y pessimistic . Ne t

export s ar e projecte da t 5 9 millio n ton s i n 201 5 an d5 6 millio n ton s i n 2020—abou t hal f th e WEF A level . Domesti c cokin g coa l consumptio n fall s t o 1 9 millio n ton s i n 201 5 an d1 6 millio n ton s i n 9 6 Energ y Informatio n Administratio n / Annua l Energ y Outloo k 199 9 

# 73P.7 4



## Forecas t Comparison s 2020 . An dindustria l coa l consumptio n i s onl y 6 7 millio n ton s i n 201 5 an d6 5 millio n ton s i n 202 0 (al l sector s of

domesti c consumptio n ar e similarl y depresse db y th e Clea n Ai r Powe r Initiative) . Thes e lo w consumptio n level s ar e reache di n spit e of lo w delivere dprice s t o th e electricit y sector : 9 5 cent s pe r millio n Bt u i n 201 5 an d9 2 cent s pe r millio n Bt u i n 2020 . Th e othe r

forecast s rang e from9 6 cent s (AE099lo w growt h case ) t o 11 4 cent s (DRI ) pe r millio n Bt u i n 2015 , an dfrom9 0 t o 110 cent s pe r millio n Bt u i n 202 0 (again , th e AE099lo w growt h cas e an dDRI) . Th e implicatio n i s tha t eve n i f efficien t production , vigorou s competition , an d declinin g rea l transportatio n cost s kee p coal' s delivere dprice s lo w an ddeclining , th e cost s o f complianc e wit h th e Clea n Ai r Powe r Initiativ e wil l blun t it s competitiv e edge . Table 21. Comparison of coal forecasts (million short tons, except

where noted) Projection

Production Consumption by sector Electricity generation' Coking plants Industrial

/other Total Net coal exports Minemouth price (1997 dollars pershort

ton) (1997 dollars permillion Btu) Average delivered

price, electricity (1997 dollars pershort

ton) (1997 dollars permillion Btu) Production Consumption by sector Electricity generation" Coking plants Industrial

/other Total Net coal exports Minemouth price (1997 dollars pershort

ton) (1997 dollars permillion Btu) Average delivered

price, electricity (1997 dollars pershort

ton) (1997 dollars permillion Btu) Reference
1,294 1,103 22 86 1,211 84 13.21 0.63 20.03 0.99 1,358 1,166 20 89 1,275 86 12.74 0.62 18.77 0.93 AE099

Low economic growth 2015 1,253 1,073 22 77 1,172 84 12.98 0.62 19.44 0.96 2020 1,281 1,098 20 76 1,195 86 12.47 0.60 18.03 0.90 High

economic growth 1,346 1,148 21 94 1,263 84 13.39 0.64 20.53 1.01 1,447 1,242 19 102 1,363 86 12.89 0.62 19.33 0.96 (

WEFA
1,300 1,100 26 73 1,200 103 15.13 0.70 21.78 1.06 1,368 1,199 24 76 1,299 119 14.95 0.69 21.42 1.04 Otherforecasts

GRUHill

957 801 19 67 887 59 NA NA 18.98 0.95
938 789 16 65 870 56 NA NA 18.19 0.92 DRI

1,327 1.136 24 88 1,247 79 NA NA 23.33 1.14 1,389 1,196 21 88 1,305 80 NA NA 22.52 1.10 " Th e DR I an dAE099forecast s fo

r electricit y generatio n includ e nonutility generators . Consumptio n b y Industria l cogenerator s i s Includedi n industria l consumption . Th e WEF A value s fo

r electricit y consumptio n hav e bee n adjuste dby includin g consumptio n b y nonutility generator s (11. 2 millio n ton s I n 201 5 an d2020) . N A = Not available . Bt u = BriUs h therma l uni t Sources : AE099: AE09 9 Nationa l Energ y Modeling System , run s AEO99B.D100198A (referenc e case) , LMAC99.D100198A (lo w economic growt

h case) , an dHMAC99.D100198A (hig h economic growt h case) . WEFA : Th e WEF A Group . U.S. Energy Outlook (1998) . GRI/HiU : Ga s Researc h Institute , Final Report, Coal

Demand and Price Projections. Vol . I . GRI-98/0053. 1 (March 1998) . DRI : DRI/McGraw-Hill . Worid Energy Service: U.S. Outlook (April 1998) . Energ y Informatio n Administratio n / Annua l Energ y Outloo k 199 9 9 7 

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