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Rising Food and Energy Prices October 2 nd , 2008 Corvallis, Oregon

Projections for Energy Markets 2008-18 and Beyond. Rising Food and Energy Prices October 2 nd , 2008 Corvallis, Oregon. A. Michael Schaal Director, Oil and Gas Division Office of Integrated Analysis and Forecasting Energy Information Administration. Outline.

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Rising Food and Energy Prices October 2 nd , 2008 Corvallis, Oregon

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  1. Projections for Energy Markets 2008-18 and Beyond Rising Food and Energy Prices October 2nd, 2008 Corvallis, Oregon A. Michael Schaal Director, Oil and Gas Division Office of Integrated Analysis and Forecasting Energy Information Administration

  2. Outline • EIA’s Annual Energy Outlook 2008 Reference Case • Impacts of Revised CAFE and Renewable Fuel Standard • Alternative Scenarios For AEO 2008 Rising Food and Energy Prices

  3. Energy use per capita and per dollar of GDP (index, 1970=1.0) per capita per dollar real GDP History Projection Rising Food and Energy Prices

  4. U.S. Primary Energy Consumption by Fuel, 1960-2030 (quadrillion Btu) History Projections Coal Natural Gas Liquid Fuels & Other Petroleum Nuclear Renewables Rising Food and Energy Prices

  5. U.S. Primary Energy Consumption by Fuel, 1960-2030 (quadrillion Btu) quadrillion Btu History Projections Liquid Fuels Coal Natural Gas Renewables Nuclear Rising Food and Energy Prices

  6. Natural Gas Consumption by End-Use Sector trillion cubic feet History Projections Industrial* Electric Power Residential Commercial Transportation** * Includes lease and plant fuel ** Includes pipeline fuel Rising Food and Energy Prices

  7. U.S. Electricity Demand Growth Trends History Projections Rising Food and Energy Prices

  8. U.S. Electricity Consumption Growth by Sector billion kilowatthours History Projections Commercial Residential Industrial Rising Food and Energy Prices

  9. Electricity Generation by Fuel Type billion kilowatthours History Projections Coal Natural Gas Nuclear Renewables Petroleum Rising Food and Energy Prices

  10. 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. Rising Food and Energy Prices

  11. New Light-Duty Vehicle Fuel Efficiency (miles per gallon) Rising Food and Energy Prices

  12. The Transportation Sector Dominates Liquid Fuels Consumption. million barrels per day History Projections Transportation Industrial Residential and Commercial Electric Power Rising Food and Energy Prices

  13. U.S. Sales of Unconventional Light-Duty Vehicles, 2015 and 2030 (thousand vehicles sold) Hybrids Flex Fuel Turbo Direct Injection Diesel Gaseous Electric Fuel Cell Rising Food and Energy Prices

  14. Motor Fuels Demand (million barrels per day) * Motor Gasoline includes E85 Rising Food and Energy Prices

  15. Tanker, Barge or Rail Bio-Refinery Bringing Liquid Fuels to Market Rising Food and Energy Prices

  16. EISA 2007 Expands the Renewable Fuel Standard (RFS) Mandate (billion credits, ethanol equivalent gallons) Rising Food and Energy Prices

  17. Legislated RFS RFS with Paragraph 7 Adjustments Liquids from Biomass (BTL) Biodiesel Net Ethanol Imports Cellulosic Ethanol Ethanol from Other Feedstocks Advanced Biofuels Mandate billion credits Rising Food and Energy Prices

  18. Meeting the Renewable Fuels Standard billion credits Legislated RFS RFS with Paragraph 7 Adjustments Liquids from Biomass (BTL) Biodiesel Net Ethanol Imports Cellulose Based Ethanol Ethanol from Other Feedstocks Corn Based Ethanol Rising Food and Energy Prices

  19. Distribution of Ethanol Volumes Requires E85 Sales (billion gallons) 2030 Rising Food and Energy Prices

  20. Motor Fuels by Source(billion gallons) Rising Food and Energy Prices

  21. Biomass to Liquids/ Reference Coal to Liquids/ Reference Gas-to-Liquids, Coal-to-Liquids, Biomass-to-Liquids, and Oil Shale Production in the Price Cases, 1990-2030 (million barrels per day) History Projections Coal to Liquids/ High price Oil Shale/High price Gas to Liquids/ High price Rising Food and Energy Prices

  22. Liquid Fuels Consumption and Domestic Supply AEO2008 AEO2007 61% Net Imports 54% 60% million barrels per day Consumption Domestic supply Projection History Rising Food and Energy Prices

  23. Carbon Dioxide Emissions million metric tons Total Carbon Dioxide Emissions AEO2007 AEO2007 2030 AEO2008 2030 AEO2008 2006 Delivered, including losses Rising Food and Energy Prices

  24. 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 AEO 2008 Scenarios Rising Food and Energy Prices

  25. Policy Change Possibilities Renewable Fuels Standards Appliance Efficiency Standards Standards Production Tax Credits Greenhouse Gas Legislation Investment Tax Credits Renewable Portfolio Standards Corporate Average Fuel Economy Standards 25 Rising Food and Energy Prices

  26. 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 Rising Food and Energy Prices

  27. 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 Rising Food and Energy Prices

  28. 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 programs 28 Rising Food and Energy Prices

  29. 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 Rising Food and Energy Prices

  30. Climate Stewardship and Innovation Act of 2007 (S. 280) • Covered Entity Emission Limits • Time PeriodLimit Description • 2012 through 2019 2004 level • 2020 through 2029 1990 level • 2030 through 2049 18 percent below 1990 level • 2050 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 Rising Food and Energy Prices

  31. Energy-Related CO2 Emissions: S.280(million metric tons) 2005 2020 2030 2005 Actual Reference S.280 Reference S.280 31 Rising Food and Energy Prices

  32. Electricity Generation by Fuel : S.280(billion kilowatthours) Reference Case S. 280 Core Case Coal w/o CCS Nuclear Renewables Natural Gas Oil/Other • 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 32 Rising Food and Energy Prices

  33. 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 Rising Food and Energy Prices

  34. 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 Rising Food and Energy Prices

  35. Annual Energy Outlook 2008, June 2008 Short Term Energy Outlook, Monthly AEO 2008Assumptions, June 2008 A. Michael Schaal Energy Information Administration Michael.Schaal@eia.doe.gov www.eia.doe.gov Rising Food and Energy Prices

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