Annual Energy Outlook 2006 with Projections to 2030 - Usinfo.org

Overviewlong-term average oil prices. In the AEO2006 referencecase, the combined production capacity of membersof the Organization of the Petroleum ExportingCountries (OPEC) does not increase as much as previouslyprojected, and consequently world oil suppliesare assumed to remain tight. The United States andemerging Asia—notably, China— are expected to leadthe increase in demand for world oil supplies, keepingpressure on prices though 2030.In the AEO2006 reference case, world petroleumdemand is projected to increase from about 82 millionbarrels per day in 2004 to 111 million barrels per dayin 2025. The additional demand is expected to be metby increased oil production from both OPEC andnon-OPEC nations. In AEO2005, world petroleumdemand was projected to reach a higher level of 121million barrels per day in 2025. The AEO2006 referencecase projects OPEC oil production of 44 millionbarrels per day in 2025, 44 percent higher than the 31million barrels per day produced in 2004. In the AEO-2005 reference case, OPEC production was projectedto reach 55 million barrels per day in 2025, more than11 million barrels per day higher than in the AEO-2006 reference case. In the AEO2006 reference case,non-OPEC oil production increases from 52 millionbarrels per day in 2004 to 67 million in 2025, as comparedwith the AEO2005 reference case projection of65 million barrels per day.The average U.S. wellhead price for natural gas in theAEO2006 reference case declines gradually from thecurrent level as increased drilling brings on new suppliesand new import sources become available. Theaverage price falls to $4.46 per thousand cubic feet in2016 (2004 dollars), then rises gradually to more than$5.40 per thousand cubic feet in 2025 (equivalent toabout $10 per thousand cubic feet in nominal dollars)and more than $5.90 per thousand cubic feet in 2030.Figure 1. Energy prices, 1980-2030 (2004 dollars permillion Btu)3530252015105HistoryProjectionsElectricityPetroleum0Coal1980 1995 2004 2015 2030Natural gasLNG imports, Alaskan natural gas production, andlower 48 production from unconventional sources arenot expected to increase sufficiently to offset theimpacts of resource depletion and increased demand.The projected wellhead natural gas prices in theAEO2006 reference case from 2016 to 2025 are consistentlyhigher than the comparable prices in theAEO2005 reference case, by about 30 to 60 cents perthousand cubic feet, primarily as a result of higherexploration and development costs.In the AEO2006 reference case, the combination ofslow but continued improvements in expected mineproductivity and a continuing shift to low-cost coalfrom the Powder River Basin in Wyoming leads to agradual decline in the projected average minemouthcoal price, to approximately $20.00 per ton ($1.00 permillion British thermal units [Btu]) in 2021 (2004 dollars).Prices then increase slowly as rising natural gasprices and the need for baseload generating capacitylead to the construction of many new coal-fired generatingplants. In 2025, the average minemouth price inthe AEO2006 reference case is projected to be $20.63per ton ($1.03 per million Btu), an increase over theAEO2005 reference case projection of $18.64 per ton($0.93 per million Btu). Trends in coal prices measuredin terms of tonnage differ slightly from thetrends in prices measured in terms of energy content,because the average energy content per ton of coalconsumed falls over time as Western subbituminouscoal, which has a relatively low Btu content, claims alarger share of the market.Average delivered electricity prices are projected todecline from 7.6 cents per kilowatthour (2004 dollars)in 2004 to a low of 7.1 cents per kilowatthour in 2015as a result of declines in natural gas prices and, to alesser extent, coal prices. After 2015, average realelectricity prices are projected to increase, to 7.4 centsper kilowatthour in 2025 and 7.5 cents per kilowatthourin 2030. In the AEO2005 reference case,electricity prices were lower in the early years of theprojection but reached about the same level in 2025.The higher near-term electricity prices projected inthe AEO2006 reference case result primarily fromhigher expected fuel costs for natural-gas- and coalfiredelectric power plants.Energy ConsumptionTotal primary energy consumption in the AEO2006reference case is projected to increase at an averagerate of 1.2 percent per year, from 99.7 quadrillion Btuin 2004 to 127.0 quadrillion Btu in 2025—6.2 quadrillionBtu less than in AEO2005. In 2025, coal, nuclear,and renewable energy consumption are higher—4 Energy Information Administration / Annual Energy Outlook 2006