U.S. ENERGY INFORMATION ADMINISTRATION
WASHINGTON DC 20585

FOR IMMEDIATE RELEASE
November 12, 1997

Energy Use, Carbon Emissions Continue to Rise In New EIA Forecast;
Industry Restructuring, Competition Help Lower Electricity Prices

EIA's Annual Energy Outlook 1998 also projects that higher energy consumption will be reflected in higher carbon emissions. The stabilization of carbon emissions and other greenhouse gases is the subject of international negotiations in Kyoto, Japan, from December 1 to 10, 1997. From 1990 levels, carbon emissions are likely to increase 34 percent by 2010, 40 percent by 2015, and 45 percent by 2020 (Figure 1). The number for 2010 is 5 percent higher than forecast last year.

The higher projections for both energy consumption and carbon emissions result in part from higher projected economic growth and lower electricity prices. Higher demand is projected in all sectors; however, increased demand by automobiles and other modes of travel contributes more than half the increase. The current forecast assumes higher growth in vehicle-miles traveled and slower growth in fuel efficiency for all travel modes. Higher demand in the other sectors results from lower electricity prices, slower efficiency improvements, more expansion of commercial floorspace early in the projection period, more use of traditional home-heating technologies, and higher growth in some energy-intensive industries.

Lower energy prices partially result from restructuring and competition in the electricity industry, where a 20-percent decline in average electricity prices is expected by 2020. Average electricity prices decline from 6.9 cents per kilowatthour in 1996 to 5.5 cents per kilowatthour in 2020 (Figure 2). By 2015, the projected prices are 13 percent lower than forecast in last year's Annual Energy Outlook. (All prices are in real, inflation-adjusted 1996 dollars.)

Restructuring is expected to provide continued impetus for operating efficiency improvements, lower production costs, and retirement of high-cost plants. Capital costs for generating equipment are also expected to decline. In addition, financial requirements for construction are expected to change, as a wider range of investors enter the competitive market.

EIA's analysis includes the transition to competitive prices in regions (California, New York, and New England) where plans to implement restructuring are currently in place. Restructuring actions in States without formal plans are omitted, so the projections do not represent the full impact of moving to competitive pricing. (The complete Annual Energy Outlook 1998, to be released next month, analyzes a fully competitive electricity market.)

Other forecast highlights
• The average minemouth price of coal is projected to decline from $18.50 a ton in 1996 to $13.27 a ton in 2020. By 2015, the price is expected to be 12 percent lower than EIA forecast a year ago, contributing to the lower electricity price projections. Recent data show a greater impact of productivity on mining cost and price than projected last year. Productivity improvements are also expected to reduce costs for Western surface mines, shifting more production to lower-cost Western mines.

• Natural gas wellhead prices are projected to be $2.54 per thousand cubic feet in 2020, up from $2.24 per thousand cubic feet in 1996. Prices are about 9 percent higher in 2015 than last year's projection, because of a lower assessment of the expansion of the resource base, higher drilling costs as indicated by more recent data, and higher projected demand for natural gas.

• The average world price of crude oil is projected to rise from $20.48 a barrel in 1996 to $22.32 a barrel in 2020. EIA projections for worldwide oil demand are higher than in last year's forecast because of higher assumed economic growth; however, the 2015 price is the same in both forecasts because of expanded production particularly from countries outside the Organization of Petroleum Exporting Countries (OPEC).

• Net oil imports are expected to provide 66 percent of oil consumption in 2020, compared with 46 percent in 1996, as a result of increasing oil consumption and declining domestic production. Crude oil production declines from 6.5 million barrels a day in 1996 to 4.9 million barrels a day in 2020. Although projected oil production in 2015 is the same as in last year's forecast, oil consumption is higher, leading to net petroleum imports that are 11 percent higher in 2015 than projected a year ago.

• Renewable sources of energy are expected to penetrate energy markets at a slower pace than previously forecast, due to electricity restructuring and increased competition with fossil fuel technologies. The assumptions for increased competition in the electricity industry tend to favor the less-capital intensive technologies over coal and baseload renewables. As a result, electricity generation from renewable resources remains relatively stable between 1996 and 2020. The slower penetration of renewable energy sources contributes to the higher carbon emissions in the current forecast.

Reference case projections from the Annual Energy Outlook 1998 and an overview of the results can be accessed immediately on EIA's World Wide Web Site (http://www.eia.doe.gov). The direct Internet address is: www.eia.doe.gov/oiaf/aeo98/earlyrel.html. The overview is also available from EIA's press contact. The figures referenced above may be viewed, together with this press release, on EIA's Web Site, or they may be obtained from EIA's press contact.

The full Annual Energy Outlook 1998 will be released on December 18, 1997. The Outlook includes cases that analyze the changes caused by different technology and productivity assumptions. Additional cases assume higher or lower economic growth rates and higher or lower world oil prices than those in the reference case. The forecasts in the Outlook assume that current legislation and regulations remain in effect.

At the time of its release, copies of the Annual Energy Outlook 1998 will be available from the U.S. Government Printing Office 202/512-1800 or through EIA's National Energy Information Center, Forrestal Building, Washington, DC 20585, 202/586-8800. The full Outlook, its underlying assumptions, and more detailed, regional projections will be available on EIA's Web Site by December 19, 1997.

The report described in this press release was prepared by the Energy Information Administration, the independent statistical and analytical agency within the U.S. Department of Energy. The information contained in the report and the press release should be attributed to the Energy Information Administration and should not be construed as advocating or reflecting any policy position of the Department of Energy or any other organization.

EIA Program Contact: Mary J. Hutzler, 202/586-2222

EIA Press Contact: Thomas Welch, 202/586-1178

EIA-97-34

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