Air Pollution Control Equipment Services, Emissions, Gas

Economic growth seen as key determinant for future energy use

Dec. 21, 2000—With a growing economy, U.S. energy demand is projected to increase 32 percent from 1999 to 2020, reaching 127 quadrillion Btu, assuming no changes in federal laws and regulations, according to alternative forecasts released today by the Energy Information Administration (EIA).

Faster or slower economic growth and faster or slower penetration of energy-efficient and renewable energy sources impact the forecast for energy demand. Part of the “Annual Energy Outlook 2001” report, the Reference Case forecast, was released on the EIA Internet site and at a press conference on November 28.

Economic growth is a major determinant of both energy demand and carbon dioxide emissions. The Reference Case forecast assumes that the U.S. gross domestic product (GDP) will grow at an average annual rate of 3.0 percent from 1999 through 2020. If the economy grows at a more rapid rate of 3.5 percent annually, the demand for energy in 2020 is projected to be 7 percent higher than the Reference Case level of 127 quadrillion Btu, and projected carbon dioxide emissions increase by 152 million metric tons carbon equivalent, or 7 percent, in 2020, compared to the Reference Case .

If the economy grows at a slower rate of 2.5 percent per year, energy demand is projected to be 6 percent lower in 2020 than in the Reference Case, and projected carbon dioxide emissions would be reduced by 125 million metric tons carbon equivalent, or 6 percent, in 2020, compared to the Reference Case.

In the Reference Case, the energy intensity of the U.S. economy, measured as energy used per dollar of GDP, is projected to decline at an average annual rate of 1.6 percent through 2020 as more efficient energy-using technologies become available and penetrate the market.

In a high technology case, more rapid improvement in the cost and efficiencies of advanced technologies and in their adoption than assumed in the Reference Case is projected to lower energy demand by 6 percent and carbon dioxide emissions by 166 million metric tons carbon equivalent, or 8 percent, in 2020, relative to the Reference Case.

However, technology could also develop at a slower rate than in the Reference Case. Assuming that the efficiencies of energy-using technologies do not change from those available today increases projected energy demand by 5 percent and carbon dioxide emissions by 116 million metric tons carbon equivalent, or 6 percent, in 2020, compared to the Reference Case.

EIA analyzed a number of other cases, including:

* In accordance with the overall assumption concerning current laws and regulations, the Reference Case projections reflect the legislation in eight States to ban or limit the use of methyl tertiary butyl ether (MTBE), an additive in gasoline that adds octane and helps meet the statutory requirement for oxygen content, in the next several years. In an alternative case, it is assumed that the use of MTBE and other ethers in gasoline is prohibited throughout the United States with a waiver of the 2-percent oxygen requirement. This results in projected national average gasoline prices that are about 3 to 4 cents per gallon higher (1999 dollars) in the 2004 to 2006 period, compared to the Reference Case.

* The Reference Case forecast assumes technology improvements in oil and natural gas exploration and production that lower costs and improve finding and success rates. Alternative cases that assume more rapid and slower technology improvements than in the Reference Case show the impact on projected natural gas prices. In the Reference Case, projected natural gas prices decline from more than $5 per thousand cubic feet in 2000 to $3.13 per thousand cubic feet in 2020 (1999 dollars). In 2020, prices are projected to range from $4.23 per thousand cubic feet in the slow technology case to $2.50 per thousand cubic feet in the rapid technology case.

* Natural gas projections also are highly sensitive to the assumptions for the domestic resource base. Natural gas prices in 2020 are projected to reach $2.62 per thousand cubic feet in a high oil and gas resource case, which assumes 20 percent higher conventional resources and inferred reserves and 40 percent higher unconventional gas resources, and $4.53 per thousand cubic feet in a low oil and gas resource case, which assumes 20 and 40 percent lower resources, respectively. In 2020, projected natural gas production ranges from 24.6 trillion cubic feet to 30.4 trillion cubic feet in the low and high resource cases, compared to 29.0 trillion cubic feet in the Reference Case. In 2020, crude oil production is projected to range from 4.6 to 5.5 million barrels per day in the same resource cases, compared to 5.1 million barrels per day in the Reference Case.

The “Annual Energy Outlook 2001” also includes the analysis of the macroeconomic projections, world oil and domestic natural gas markets, distributed generation, and the status of electricity restructuring and discusses recent and proposed regulatory changes in energy markets and other current energy issues. The report can be accessed on EIA’s Internet site at www.eia.doe.gov/oiaf/aeo/. More detailed, regional projections are also available at www.eia.doe.gov/oiaf/aeo/supplement/, and the assumptions underlying the projections are available at www.eia.doe.gov/oiaf/aeo/assumption/pdf/0554(2001).pdf.