rising food and energy prices october 2 nd, 2008 corvallis, oregon a. michael schaal director, oil...

Rising Food and Energy Prices

October 2nd, 2008Corvallis, Oregon

A. Michael SchaalDirector, Oil and Gas Division

Office of Integrated Analysis and ForecastingEnergy Information Administration

Projections for Energy Markets

2008-18 and Beyond


Outline

• EIA’s Annual Energy Outlook 2008 Reference Case

• Impacts of Revised CAFE and Renewable Fuel Standard

• Alternative Scenarios For AEO 2008


0.0

0.2

0.4

0.6

0.8

1.0

1.2

1970 1980 1990 2000 2010 2020 2030

History Projection

Energy use per capita and per dollar of GDP

(index, 1970=1.0)

per capita

per dollar real GDP


0

20

40

60

80

100

120

1960 1970 1980 1990 2000 2010 2020 2030

U.S. Primary Energy Consumption by Fuel, 1960-2030(quadrillion Btu)

History Projections

Natural Gas

Coal

Nuclear

Renewables

Liquid Fuels & Other Petroleum


0

10

20

30

40

50

1960 1970 1980 1990 2000 2010 2020 2030

U.S. Primary Energy Consumption by Fuel, 1960-2030(quadrillion Btu)

History Projections

Liquid Fuels

Natural Gas

Coal

Nuclear

Renewables

quadrillion Btu


Natural Gas Consumption by End-Use Sector

0

2

4

6

8

10

1990 2000 2005 2010 2020 2030

Transportation**

Industrial*

Residential

Commercial

Electric Power

ProjectionsHistory

* Includes lease and plant fuel** Includes pipeline fuel

trillion cubic feet


0%

2%

4%

6%

8%

10%

12%

1950 1960 1970 1980 1990 2000 2005 2010 2020 2030

History Projections

U.S. Electricity Demand Growth Trends

Annual Growth

1950s 9.0%

1960s 7.3%

1970s 4.2%

1980s 3.1%

1990s 2.4%

2000-2005 1.2%

2005-2030 1.1%


U.S. Electricity Consumption Growth by Sector

0

500

1,000

1,500

2,000

1980 1990 2000 2005 2010 2020 2030

Residential

Industrial

CommercialProjectionsHistory

billion kilowatthours


Electricity Generation by Fuel Type

0

1,000

2,000

3,000

1980 1990 2000 2005 2010 2020 2030

Petroleum

Renewables

Coal

Natural Gas

Nuclear

History Projections

billion kilowatthours


AEO 2008 Outlook Affected By The Energy Independence and Security Act of 2007

• Increased Corporate Average Fuel Economy (CAFE).– Light Duty Vehicle fuel economy standard of 35 miles per gallon

by 2020.

• Increased and Diversified the Renewable Fuels Standard (RFS)

• Other End-Use Efficiency Standards.


New Light-Duty Vehicle Fuel Efficiency (miles per gallon)

0

10

20

30

40

1978 1983 1988 1993 1998 2003 2008 2013 2018 2023 2028

AEO2008

AEO2007


0

3

6

9

12

15

18

1970 1980 1990 2000 2010 2020 2030

Industrial

Transportation

Residential and CommercialElectric Power

ProjectionsHistory

The Transportation Sector Dominates Liquid Fuels Consumption.

million barrels per day


0

500

1,000

1,500

2,000

2,500

3,000

3,500

2015 2030

U.S. Sales of Unconventional Light-Duty Vehicles,2015 and 2030 (thousand vehicles sold)

Hybrids

Flex Fuel

Turbo Direct Injection Diesel

GaseousElectric

Fuel Cell


Motor Fuels Demand (million barrels per day)

0

2

4

6

8

10

12

1995 2000 2005 2010 2015 2020 2025 2030

Motor Gasoline* Diesel

* Motor Gasoline includes E85


Bringing Liquid Fuels to Market

Bio-RefineryTanker, Barge

or Rail


EISA 2007 Expands the Renewable Fuel Standard (RFS) Mandate

(billion credits, ethanol equivalent gallons)

0

10

20

30

40

Total

Advanced Biofuels

Cellulosic Biofuels

Biomass-BasedDiesel


Advanced Biofuels Mandate

0

10

20

30

40

2006 2010 2020 2030

RFS with Paragraph 7 Adjustments

billion credits

Cellulosic Ethanol

Net EthanolImports

Biodiesel

Legislated RFS

Liquids from Biomass (BTL)

Ethanolfrom OtherFeedstocks


0

10

20

30

40

2006 2010 2020 2030

CornBased

Ethanol

Legislated RFS

Cellulose Based Ethanol

Meeting the Renewable Fuels Standard

Net Ethanol Imports

billion credits

Biodiesel

Liquids from Biomass (BTL)

RFS with Paragraph 7 Adjustments

Ethanolfrom OtherFeedstocks


Distribution of Ethanol Volumes Requires E85 Sales (billion gallons)

0

4

8

12

16

2006 Reference High Price Low Price

Ethanol in E10

Ethanol in E85

2030


Motor Fuels by Source (billion gallons)

0

50

100

150

200

250

1995 2000 2005 2010 2015 2020 2025 2030

Biofuel Content ofDiesel

Fossil Fuel Contentof Diesel

Biofuel Content ofGasoline

Fossil Fuel Contentof Gasoline


Gas-to-Liquids, Coal-to-Liquids, Biomass-to-Liquids, and Oil Shale Production in the Price Cases, 1990-2030

(million barrels per day)

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1990 1995 2000 2005 2010 2015 2020 2025 2030

Coal to Liquids/High price

Gas to Liquids/High price

History Projections

Oil Shale/High price

Biomass to Liquids/Reference

Coal to Liquids/Reference


Liquid Fuels Consumption and Domestic Supply

0

10

20

30

1970 1980 1990 2000 2010 2020 2030

Consumption

Domestic supply

History Projection

million barrels per day

Net Imports 60%

54%61%

AEO2008AEO2007


0

500

1,000

1,500

2,000

2,500

3,000

3,500

Residential Commercial Industrial Transportation Electric Power

Electricity

Coal

Natural Gas

Petroleum

AEO20082030

5,500

6,000

6,500

7,000

7,500

8,000

2006 2010 2015 2020 2025 2030

Total Carbon Dioxide Emissions

million metric tons

Delivered, including losses

AEO20072030

2006

AEO2008

AEO2007

Carbon Dioxide Emissions


AEO 2008 Scenarios

• Reference• Early Release Reference• Low Economic Growth• High Economic Growth• Low Price• High Price• Residential: 2008 Technology• Residential: High Technology• Residential: Best Available Technology• Commercial: 2008 Technology• Commercial: High Technology• Commercial: Best Available Technology• Industrial: 2008 Technology• Industrial: High Technology• Transportation: High Technology• Electricity: Low Nuclear Cost• Electricity: High Nuclear Cost• Electricity: Low Fossil Cost• Electricity: High Fossil Cost

• Renewable Fuels: High Renewable Cost• Renewable Fuels: Low Renewable Cost• Oil and Gas: Rapid Technology• Oil and Gas: Slow Technology• Oil and Gas: High LNG Supply• Oil and Gas: Low LNG Supply• Oil and Gas: ANWR• Coal: Low Coal Cost• Coal: High Coal Cost• Integrated 2008 Technology• Integrated High Technology• Integrated Alternative Weather Case• High Commodity Cost• Low Commodity Cost• Restricted Non-Natural Gas Electricity

Generation• Restricted Natural Gas Supply• Combined High Demand/Low Natural

Gas Supply Case


Policy Change Possibilities

Greenhouse Gas Legislation

25


Recent EIA Policy Analysis

• Energy and Economic Analysis of S. 2191, America’s Climate Security Act of 2007 – April 2008

• Energy and Economic Analysis of S. 1766, the Low Carbon Economy Act of 2007

• Proposal requiring 25 percent renewable fuels in the motor vehicle transportation and electricity markets by 2025

26


Recent EIA Policy Analysis (Continued)

• Analysis of S. 280, the Climate Stewardship and Innovation Act of 2007

• Impacts of a 15-Percent Renewable Portfolio Standard, June 2007

• All available at:– http://www.eia.doe.gov/oiaf/service_rpts.htm– http://www.eia.doe.gov/oiaf/analysis.htm

27

http://www.eia.doe.gov/oiaf/service_rpts.htm

http://www.eia.doe.gov/oiaf/service_rpts.htm

http://www.eia.doe.gov/oiaf/analysis.htm

http://www.eia.doe.gov/oiaf/analysis.htm


Key GHG Policy Analysis Factors

• Stringency of emission limits

• Coverage– What gases? What sectors?

• Timing / Banking

• Treatment of offsets– Foreign and domestic -- Agricultural and forestry

• Safety Valve / Technology Accelerator Payment

• Allowance allocation methodology

• Use of allowance revenue and other supporting programs28


Climate Stewardship and Innovation Act of 2007 (S. 280)

• Caps GHG emissions on covered entities in the electric generation, commercial, and industrial sectors, together with producers and importers of hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride, and petroleum refiners and product importers.

• Covered entities include all entities in covered sectors that own or control a single facility with emissions of 10,000 metric tons or more. – Emissions of covered entities accounted for an estimated 78

percent of total U.S. GHG emissions in 2004. – As emissions by covered entities are subject to limits that tighten

over time under S.280, their share in total U.S. GHG emissions falls.

29


Climate Stewardship and Innovation Act of 2007 (S. 280)

• Covered Entity Emission Limits

Time Period Limit Description2012 through 2019 2004 level2020 through 2029 1990 level2030 through 2049 18 percent below 1990 level2050 and beyond 60 percent below 1990 level

• Offsets (domestic or international) can be used in an amount equivalent to up to 30 percent of the allowance obligation

30


Energy-Related CO2 Emissions: S.280(million metric tons)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000 Electric Power Transportation IndustrialResidential Commercial

2005 2020 2030

2005 Actual Reference S.280 Reference S.280

31


Electricity Generation by Fuel : S.280 (billion kilowatthours)

0

1000

2000

3000

4000

5000

6000

2005 2010 2015 2020 2025 2030

0

1000

2000

3000

4000

5000

6000

2005 2010 2015 2020 2025 2030

Reference Case S. 280 Core Case

• Nuclear and renewable generation grows , displacing coal-fired generation. Nuclear and renewables are generally less expensive than coal with carbon capture and sequestration (CCS) without any special incentives.

• S.280 is also projected to reduce electricity demand growth, reflecting both higher electricity prices and targeted support of high-efficiency equipment

Coal w/o CCS Nuclear Renewables Natural Gas Oil/Other

32


Summary

• In the AEO 2008 Reference Case traditional fossil fuels are expected to continue to meet the bulk of energy requirements over the projection period

• U.S. energy demand is projected to grow at an average annual rate of 0.7 percent

• The energy efficiency of the economy is projected to increase at an average annual rate of 1.7 percent

• EISA 2007 will have a significant impact on liquid fuels production and use.– Lower petroleum imports– Lower CO2 Emissions– Shift towards diesel


Summary (continued)

• The RFS, made up of four mandates, met by a combination of ethanol, diesel production and imports.

– Achieves 32 billion gallons by 2022– RFS implementation is in its early phases and significant uncertainties remain.

• The impacts of GHG policies depend on the specifics of the proposal but the likely impacts include:

– Lower coal generation– Greater nuclear, renewable, and natural gas (under some circumstances) generation– Reduced energy demand– Higher energy prices

• Key uncertainties include:– Cost, performance and feasibility of rapidly commercializing and deploying key low-

carbon generating technologies– Cost and availability of domestic and foreign offsets– If these technologies can not be deployed in a timeframe consistent with the emission

reduction requirements, allowance prices, energy prices and the use of other low-carbon fuels, particularly natural gas, will be higher


A. Michael Schaal

Energy Information Administration

[email protected]

Annual Energy Outlook 2008, June 2008

Short Term Energy Outlook, Monthly

AEO 2008 Assumptions, June 2008

www.eia.doe.gov

rising food and energy prices october 2 nd, 2008 corvallis, oregon a. michael schaal director, oil...

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