World Energy Outlook 2006

toe per capita
Figure 11.16: World Electricity Demand and Real GDP Per Capita
0.20
0.18
0.16
0.14
0.12
0.10
5.0 5.5 6.0 6.5 7.0 7.5 8.0 8.5 9.0 9.5
Source: IEA analysis.
Price Sensitivity Analysis
1990 2004
GDP per capita (thousand $ in year-2005 dollars, PPP)
Real oil and gas prices are assumed to remain high in 2006 and 2007 and then
to fall back gradually over the next five years or so, before resuming a modestly
rising trajectory through to 2030. But several factors could combine to change
this price path. For example, lower investment in exploration and development
of oil and gas reserves could cause crude oil markets to tighten further, forcing
up prices (see Chapter 3). Alternatively, slower economic growth could depress
energy demand growth and, therefore, prices.
In view of the uncertainty surrounding near-term price prospects, we have
carried out a separate analysis using the World Energy Model (WEM) 11 – the
primary tool used to produce the energy-demand projections contained in the
Outlook – to examine the effects of higher price assumptions on energy
demand by fuel and sector. In this exercise, the average IEA crude oil import
price is assumed to be $20 per barrel (in year-2005 dollars), or 39%, higher
than in the Reference Scenario in each year from 2007 through to the end of
the projection period. Natural gas and coal prices are also assumed to change,
with approximately 90% of the percentage change in the oil price reflected in
the gas price and 20% in the coal price in each region. This sensitivity analysis
takes into account the impact on GDP of changes in energy prices, based
11. The WEM incorporates estimates of own-price and cross-price elasticities of demand, derived
largely from detailed sector-by-sector and fuel-by-fuel econometric analysis of demand. These
estimates are constantly updated.
Chapter 11 - The Impact of Higher Energy Prices 295
11
© OECD/IEA, 2007