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The Outlook for Energy Markets
World oil markets have become increasingly tight since 2003.
Global demand growth, fed by worldwide economic growth, has exceeded non-OPEC supply growth.
OPEC and inventories are relied upon to fill the gap, but OPEC production has only risen modestly.
Geopolitical uncertainty in oil producing countries contributes to risk of supply disruptions. Low levels of surplus production capacity heighten this risk.
Tight markets are more sensitive to non-fundamental factors.
To balance the market, prices have risen sharply.
Without a sustained increase in global production capacity, markets are expected to remain very tight.
Recent experience with non-OPEC supply suggests that OPEC and the NOCs, who together control the vast majority of currently proved reserves, must take the lead in this effort.
Oil market fundamentals are driving the 5-year run-up in prices
0
20
40
60
80
100
120
140
Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08
1996-2002 Average
Prior to 2000, oil prices were relatively stable and well below $30 per barrel.
Starting in 2003, oil prices began climbing due to inventory tightening, increasing world oil demand, and reduced surplus production capacity.
Oil prices have increase by almost 300 percent since January 2003
West Texas Intermediate crude oil, dollars per barrel
Short-Term Energy Outlook June 2008
Despite higher prices, world oil demand growth is strong
2003 2004 2005 2006 2007 2008
China United States Other
1.6
2.7
1.3
1.0
0.8
Total World Oil Consumption Growth
Since 2003, world oil consumption has growth has averaged 1.8 percent per year.
Non-OECD countries, especially China, India, and the Middle East, represent the largest part of this growth.
1.0
(est.)
Short-Term Energy Outlook June 2008
growth from prior year, million barrels per day
cumulative oil production change, 2003-2007, million barrels per day
-1.45
-0.31
-0.31
0.19
0.25
0.34
0.38
0.43
0.52
1.34
North Sea
U.S.
Mexico
Sudan
Canada
China
Kazakhstan
Brazil
Azerbaijan
Russia
…while overall non-OPEC supply growth has slowed in recent years
In the past 3 years, non-OPEC supply growth has been well below levels seen just 4 years ago.
Russia drove non-OPEC supply growth during the first part of the decade; however, Russian oil production is down year-over-year in 2008.
Total Non-OPEC Growth
1.0 0.9
-0.1
0.20.4
2003 2004 2005 2006 2007
Short-Term Energy Outlook June 2008
As a result, the world oil market balance has tightened significantly
1.6
2.7
1.3
1.00.8
1.0 0.9
-0.1
0.20.4
2003 2004 2005 2006 2007
World Oil ConsumptionGrowth
Non-OPEC ProductionGrowth
World oil consumption growth has outpaced non-OPEC supply growth every year since 2003.
This imbalance increases reliance upon OPEC production and/or inventories to fill the gap.
Short-Term Energy Outlook June 2008
growth from prior year, million barrels per day
World surplus production capacity remains low, leaving world oil markets vulnerable to supply disruptions
1.9
1.31.0
1.5
2.2
1.7
0.0
1.0
2.0
3.0
4.0
2003 2004 2005 2006 2007 2008 (est.)
1996-2002 Historic Average (3.9 million barrels per day)
Short-Term Energy Outlook June 2008
Current world surplus production capacity is below historic levels.
In addition, it is highly concentrated in a few countries, with Saudi Arabia holding almost all of this capacity.
million barrels per day
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
1980 1990 2000 2010 2020 2030
World oil prices are expected to decline before rising again
History Projections
$113
$69
$186
International Energy Outlook 2008
nominal dollars per barrel
High Price
Reference
Low Price
World marketed energy use in the non-OECD will soon surpass that of the OECD
0
50
100
150
200
250
300
350
400
450
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030
OECD
Non-OECD
History Projections
241
221
286
409
International Energy Outlook 2008
quadrillion Btu
Fossil fuels will continue to dominate world energy use
0
50
100
150
200
250
1990 1995 2000 2005 2010 2015 2020 2025 2030
Liquids
Natural GasCoal
33%
29%
8%Renewables
Nuclear
24%
6%
Share of WorldTotal
History Projections
37%
23%
27%
8%
6%
International Energy Outlook 2008
quadrillion Btu
Unconventional liquids will increase as a share of world production
0
20
40
60
80
100
120
1990 1995 2000 2005 2010 2015 2020 2025 2030
Non-OPEC Conventional
OPEC Conventional
Unconventional
Total
55
10
48
113
International Energy Outlook 2008
millions of barrels of oil equivalent per day
U.S. energy prices are expected to decline in the near term, then rise
$0
$5
$10
$15
$20
$25
$30
$35
1980 1990 2000 2005 2010 2020 2030
Crude Oil
Electricity
Coal
Natural Gas
ProjectionsHistory
2006 dollars per million Btu
Annual Energy Outlook 2008
0
10
20
30
40
50
1960 1970 1980 1990 2000 2010 2020 2030
Liquid fuels continue to dominate primary energy consumption in the United States
Annual Energy Outlook 2008
History Projections
Liquid Fuels
Natural Gas
Coal
Nuclear
Renewables
quadrillion Btu
U.S. crude oil production is primarily from the onshore and deep offshore
0
2
4
6
8
1990 2000 2005 2010 2020 2030
Lower 48 Onshore
Alaska
Deep Offshore
ProjectionsHistory
Annual Energy Outlook 2008
Total
Shallow Offshore
million barrels per day
0
5
10
15
20
25
1960 1970 1980 1990 2000 2010 2020 2030
U.S. dependence on imports of liquid fuels and other petroleum declines by 2030
Consumption
Domestic Supply
Net Imports
60%
54%
Annual Energy Outlook 2008
History Projections
million barrels per day
U.S. dependence on natural gas net imports declines slightly
0
5
10
15
20
25
30
1960 1970 1980 1990 2000 2010 2020 2030
16% 14%Net Imports
Consumption
Production
Natural Gas Net Imports, 2006 and 2030
2.9
0.50.3
2.8
0
1
2
3
4
Pipeline Liquefied Natural Gas
20062030
Annual Energy Outlook 2008
History Projections
trillion cubic feet
Unconventional natural gas production will account for nearly half of U.S. supply
0
2
4
6
8
10
1990 2000 2005 2010 2020 2030
Alaska
Lower 48 Non-Associated Unconventional
Lower 48 Non-Associated Offshore
Lower 48 Associated-Dissolved
Lower 48 Non-AssociatedConventional Onshore
ProjectionsHistory
Annual Energy Outlook 2008
trillion cubic feet
Guy F. Caruso
Periodic Reports
Petroleum Status and Natural Gas Storage Reports, weekly
Short-Term Energy Outlook, monthly
Annual Energy Outlook 2008, March 2008, full report, June 2008
International Energy Outlook 2008, June 2008, full report, July 2008
Examples of Special Analyses
“Economic Effects of High Oil Prices,” Annual Energy Outlook 2006
Analysis of Crude Oil Production in the Arctic National Wildlife Refuge,
May 2008
The Global Liquefied Natural Gas Market: Status and Outlook, December 2003
“Impacts of Increased Access to Oil and Natural Gas Resources in the Lower 48 Federal Outer Continental Shelf,” Annual Energy Outlook 2007
Energy Market and Economic Impacts of S.2191, the Lieberman-Warner Climate Security Act of 2007, April 2008
www.eia.doe.gov
