The Annual Energy Outlook 2003 (AEO2003) presents forecasts of energy consumption, supply, and prices through 2025 prepared by the Energy Information Administration (EIA). The projections are based on results from EIA's National Energy Modeling System (NEMS).

Although the impact of near-term trends and events is reflected in AEO2003, its focus is on the long-term, including the availability of energy resources, developments in U.S. electricity markets, technology improvement, and the impact of economic growth on projected energy demand and prices through 2025. The AEO2003 provides a reference case and a series of alternative cases, including high and low world oil prices, high and low macroeconomic growth, and numerous technology cases.

Energy Consumption
Total U.S. energy consumption in AEO2003 is projected to increase from 97.3 to 139.1 quadrillion British thermal units (Btu) between 2001 and 2025, an average annual increase of 1.5 percent. The projections for total energy consumption in AEO2003 through 2020 are similar to AEO2002, but consumption by sector shifts; in particular, transportation consumption is higher and industrial consumption is lower.

The higher consumption by the transportation sector results from a forecast of higher vehicle miles traveled and lower vehicle efficiency when compared to the AEO2002 results. The lower level of industrial energy consumption is partly the result of an updated definition of consumption in this sector. The energy demand of combined-heat-and-power plants that produce electricity but little steam is now included in the electric power sector.

Energy Production and Imports
Total energy consumption is expected to increase more rapidly than domestic energy production through 2025. As a result, net imports of energy are projected to rise from 27 percent of U.S. energy requirements in 2001 to 36 percent in 2025.

Total Energy Production and Consumption, 1970-2025 (Quadrillion Btu)

Source: Energy Information Administration.

Projected U.S. crude oil production declines to 5.3 million barrels per day by 2025 in AEO2003, an average annual decrease of 0.4 percent between 2001 and 2025. However, total domestic petroleum production, including natural gas plant liquids, is expected to increase from 7.7 million barrels per day in 2001 to 8.0 million barrels per day by 2025.

Petroleum
AEO2003 forecasts total petroleum demand will grow at an average annual rate of 1.7 percent through 2025, led by growth in the transportation sector, which is expected to account for about 74 percent of petroleum demand in 2025.

The average world oil price is projected to increase to $26 per barrel (prices are in 2001 dollars unless otherwise stated) in 2003, decline to $23 per barrel in 2005, and then grow slowly to reach about $26.50 in 2025 ($48 per barrel in nominal dollars).

Growth in oil production in both OPEC and non-OPEC nations is expected to contribute to relatively slow growth in prices through 2025. OPEC conventional oil production is expected to more than double to reach 60.1 million barrels per day in 2025. Net imports, which accounted for 55 percent of total U.S. petroleum demand in 2001, are expected to grow to 68 percent of demand by 2025.

Natural Gas
Total demand for natural gas is projected to increase at an average annual rate of 1.8 percent between 2001 and 2025, primarily because of growth in demand for electricity generation. Average natural gas prices at the wellhead are projected to reach about $3.90 per thousand cubic feet by 2025 (more than $7.00 per thousand cubic feet in nominal dollars) under the impacts of resource depletion and increased demand. However, prices are forecast to fluctuate somewhat as higher prices allow the introduction of new, large-volume natural gas projects that temporarily depress prices when brought on line.

Domestic natural gas production is projected to increase from 19.5 to 25.1 trillion cubic feet between 2001 and 2020, an average rate of 1.3 percent per year. After 2020, domestic production increases noticeably with the projected completion of an Alaskan pipeline, reaching 26.8 trillion cubic feet by 2025.

Energy Consumption by Fuel, 1970-2025 (Quadrillion Btu)

Source: Energy Information Administration.

Despite the projected increase in domestic natural gas production, an increasing share of U.S. gas demand is met by imports, including pipeline imports from Canada and Mexico, and liquefied natural gas. Net imports of natural gas are projected to increase from 3.7 trillion cubic feet in 2001 to 7.8 trillion cubic feet in 2025.

Coal
Total coal consumption is projected to increase at an average rate of 1.3 percent per year between 2001 and 2025. U.S. coal production is projected to increase from 1,138 million short tons in 2001 to 1,440 million short tons by 2025, an average rate of 1 percent per year.

The average minemouth price of coal is projected to decline from $17.59 in 2001 to about $14.40 per short ton (2001 dollars) in 2020 and remain at about that level through 2025. Prices decline because of increased mine productivity, a shift to western production, and competitive pressures on labor costs.

Electricity
Consumption of electricity is forecast to grow by 1.8 percent per year from 2001 to 2025. Growth in the demand for electricity is forecast for computers, office equipment, and electrical appliances; however, demand growth is expected to slow as market saturation is reached for air conditioning and some other applications.

Average electricity prices are projected to decline from 7.3 cents per kilowatthour in 2001 to a low of 6.3 cents by 2007 as a result of cost reductions in an increasingly competitive market, excess generating capacity from the recent construction boom, and the continued decline in coal prices. Starting in 2008, average real electricity prices are projected to increase by 0.4 percent per year as a result of rising natural gas prices and a growing need for new generating capacity. Real electricity prices reach 6.7 cents per kilowatthour by 2025.

Although coal remains the primary fuel for electricity generation through 2025, the natural gas share of electricity generation is projected to increase from 17 percent in 2001 to 29 percent in 2025, while the coal share declines from 52 percent to 48 percent over the same period.

Nuclear Power
The downturn in nuclear generation previously expected is now anticipated to be delayed or eliminated as existing facilities substantially improve their performance and their capacity is uprated. In AEO2003, total nuclear capacity is projected to increase from 98 gigawatts in 2001 to a peak of 100 gigawatts by 2006 as a result of uprates, remaining at about that level through 2025.

Renewable Energy
Total renewable fuel consumption, including ethanol for gasoline blending, is projected to grow at an average rate of 2.2 percent per year through 2025, primarily due to State mandates for renewable electricity generation. About 55 percent of the projected demand for renewables in 2025 is for electricity generation.

Renewable technologies are projected to grow slowly because of the relatively low costs of fossil-fired generation. Total renewable generation is projected to increase from 298 billion kilowatthours in 2001 to 495 billion kilowatthours by 2025.

Energy Intensity
Energy intensity, defined as energy use per dollar of gross domestic product, is projected to continue to decline at an average annual rate of 1.5 percent through 2025, as efficiency gains and structural shifts in the economy offset growth in the demand for energy services. Per capita energy use is projected to increase by 0.7 percent per year between 2001 and 2025 in AEO2003.

Carbon Dioxide Emissions
Carbon dioxide emissions from energy use are projected to increase from 1,559 to 2,237 million metric tons carbon equivalent between 2001 and 2025, an average annual increase of 1.5 percent. As a result of definitional changes, carbon dioxide emissions in the electric power sector are higher in AEO2003 in 2020 compared with AEO2002 by 6.7 million metric tons carbon equivalent (1 percent).

Carbon dioxide emissions are higher by 14.6 million metric tons carbon equivalent in 2020 in the transportation sector in AEO2003 due to projections of less improvement in vehicle efficiency and more vehicle miles traveled.

Supplementary Information
The published AEO2003 report presents national level projections of energy prices, consumption and supply for the reference and alternative cases. Regional projections by the nine Census divisons are available in the supplemental tables on the EIA Web site.

Annual Energy Outlook 2003, DOE/EIA-0383(2003); 256 pages, 24 tables, 119 figures.

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File last modified: January 28, 2003