U.S. ENERGY INFORMATION ADMINISTRATION
WASHINGTON DC 20585

FOR IMMEDIATE RELEASE
November 17, 1998

Asian Economic Downturn Slows Growth in Oil Prices through 2007

World oil prices are expected to be affected well into the next decade by the recent economic crisis in East Asian countries, with prices for the year 2000 forecast to be as much as $5.50 per barrel (1997 dollars) lower than projections made just one year ago (Figure 1). Growth in world oil demand will slow in the near term but will resume after 2000 according to the Energy Information Administration (EIA) which today released the reference case forecasts of its Annual Energy Outlook 1999.

"The cyclical impacts of the global slowdown in oil demand growth will keep prices from fully recovering to previously expected levels until 2007," said EIA Administrator Jay Hakes. "However, for projections farther out to 2010 or 2020, we're seeing little change this year from last year's estimates for oil prices and other major energy indicators."

Carbon dioxide emissions from energy use in the United States are projected to increase 33 percent over 1990 levels by 2010 and by 47 percent in 2020, reaching 1,790 million metric tons in 2010 and 1,975 million metric tons in 2020, compared with 1,346 million metric tons in 1990 (Figure 2). The projections, which assume current laws and regulations, show that growing energy demand and a decline in nuclear electricity generation are met mostly by fossil fuels, with renewable energy consumption increasing at an average annual rate of only 0.8 percent through 2020.

Average retail electricity prices are projected to decline from 6.9 cents per kilowatthour in 1997 to 5.6 cents per kilowatthour in 2020 (Figure 3) because of increasing competition in the wholesale electricity market and because of declining coal prices due to improved productivity in coal mining overall and from growing production from lower-cost mines in the West.

Other forecast highlights include:

• Oil imports continue to rise, with net oil imports providing 65 percent of U.S. consumption in 2020, up from 49 percent in 1997. Transportation demand for petroleum continues to increase as the penetration of efficiency improvements in vehicles and aircraft is insufficient to offset growing travel demand.

• Natural gas wellhead prices are projected to increase at an average rate of 0.8 percent a year through 2020, from $ 2.23 per thousand cubic feet in 1997 to $2.68 in 2020. Domestic demand, especially for electricity generation, increases rapidly but technological improvements in exploration and production moderate the effect on prices.

• Despite the increased share of natural gas as a source of electricity - from 14 percent of generation in 1997 to 33 percent in 2020 - coal remains the dominant source of generation, though it declines slightly by 2020 because electricity industry restructuring favors the less capital-intensive, more efficient gas-fired generating plants.

• The effects of reductions in nitrogen oxide (NOx) emissions called for by the Clean Air Act Amendments of 1990 and the ozone transport rule show that the projected $ 2 billion annualized cost of installing NOx control technologies is small relative to the $200 billion that consumers spend on electricity each year.

Reference case projections from the Annual Energy Outlook 1999 and an overview of the results can be accessed on EIA's Internet site at http://www.eia.doe.gov/oiaf/aeo99/earlyrel.html. The full report, including projections with differing assumptions on the price of oil, the rate of economic growth, and the introduction of new technologies, will be released on December 17, 1998, along with regional projections and a report on the major forecast assumptions.

EIA Program Contact: Mary J. Hutzler, 202/586-2222
EIA Press Contact: National Energy Information Center, 202/586-8800, infoctr@eia.doe.gov

EIA-98-27

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